Using Microsoft Dynamics 365 for Finance and Operations

This book provides precise descriptions and instructions which enable users, students and consultants to understand Microsoft Dynamics 365 for Finance and Operations rapidly. Microsoft offers Dynamics 365 as its premium ERP solution, supporting large and mid-sized organizations with a complete business management solution which is easy to use. Going through a simple but comprehensive case study, this book provides the required knowledge to handle all basic business processes in Microsoft Dynamics 365 for Finance and Operations. Exercises are there to train the processes and functionality, also making this book a good choice for self-study.


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Andreas Luszczak

Using Microsoft Dynamics 365 for Finance and Operations Learn and understand the functionality of Microsoft’s enterprise solution

Using Microsoft Dynamics 365 for Finance and Operations

Andreas Luszczak

Using Microsoft Dynamics 365 for Finance and Operations Learn and understand the functionality of Microsoft’s enterprise solution

Andreas Luszczak Wien, Austria

ISBN 978-3-658-24106-3 ISBN 978-3-658-24107-0  (eBook) https://doi.org/10.1007/978-3-658-24107-0 Library of Congress Control Number: 2018965573 Springer Vieweg © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer Vieweg imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Preface Reading this Book The primary purpose of this book is to provide you with a good knowledge of the concept and functionality of Microsoft Dynamics 365 for Finance and Operations. As a result, you should be able you to execute business processes in the application on your own. It is primarily designed for users, students, and consultants who are interested in learning how to use the application. Going beyond the operations on the user interface, you learn how the different parts of the application work together. For this reason, also system administrators, developers, IT executives, or consultants who do not know all the details of the application take advantage of getting to know the end-to-end concept. The best way to learn an application is to use it. For that reason, this book includes exercises that build up on each other in a comprehensive case study. If you need support with the exercises, download the illustrated sample solutions. Microsoft Dynamics 365 for Finance and Operations is a very comprehensive business solution, which makes it impossible to explain all parts of the application in a single book. In order to provide a profound understanding of the core application, this book addresses the core functionality in the supply chain (including trade and logistics, and production control) and finance management. It covers the application but does not cover tasks in system administration and development.

Microsoft Dynamics 365 Version This book is based on version 8.1 of Microsoft Dynamics 365 for Finance and Operations (released in October 2018). It is an update of my previous book editions on Dynamics AX. In order to avoid repeating the current long name, the short name “Dynamics 365” is used for the application in most parts of this book.

Applicable Settings In Dynamics 365, you can individually select the language of your user interface. Descriptions and illustrations in this book refer to the language “EN-US” (United States English). Whereas it is obvious that the Dynamics 365 client shows different labels when you select languages like Spanish or Russian, there are also differences when you select British English. For example, the label for the field “Sales tax” is “VAT” in British English. Other differences between your application and the

VI

Preface

descriptions in the book are possibly caused by permission settings, by local features, by later updates, or by modifications and add-ons in your application. In order to benefit from the explanations, it is recommended to practice with Dynamics 365. A separate test application, which you can use to execute the exercises, is required to avoid an impact on actual company data. The illustrations and the exercises in this book refer to the Microsoft standard demo environment with the company “Contoso Entertainment System USA” (“USMF”). For the screenshots, the color theme “High contrast” and a small element size has been selected in the visual preferences of the user options. In order to grant a flexible choice of your training environment, the tasks in the exercises are specified in a way that you can use any Dynamics 365 test environment of your choice.

Available Support You can download the exercise guide for the exercises in this book and other applicable resources from the online service of the publisher, or from my website: http://D365book.addyn.com If you have comments or questions regarding the book or the exercises, please contact me via this website or e-mail to [email protected]

Acknowledgments Many people have been involved in finalizing this book, directly and indirectly, from the first to the current edition. Thank you to all of them. In particular, I would like to mention Matthias Gimbel (STZ IT Business Consulting), Ingo Maresch (Solutions Factory Consulting), and Finn Nielsen-Friis (AXcademy). Thank you also to the editor, Sabine Kathke, and to my family – Sonja, Felix, and Caroline. Andreas Luszczak

Table of Contents 1

What is Microsoft Dynamics 365/AX? ..................................................................... 1 1.1

Dynamics 365, Dynamics AX and Axapta .................................................... 1

1.2

Dynamics 365 for Finance and Operations at a Glance .............................. 2 1.2.1 1.2.2 1.2.3 1.2.4

2

Functional Capabilities ........................................................................ 2 Implementation ..................................................................................... 3 Data Structure ....................................................................................... 4 Voucher Principle ................................................................................. 4

Getting Started: Navigation and General Options ................................................ 5 2.1

User Interface and Common Tasks ............................................................... 5 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7

2.2

Login and Authentication.................................................................... 5 Navigation ............................................................................................. 5 Elements of the User Interface ............................................................ 9 Working with Records ....................................................................... 17 Filtering and Sorting........................................................................... 23 Help System......................................................................................... 28 Case Study Exercises .......................................................................... 29

Printing and Reporting.................................................................................. 30 2.2.1 Printing Documents............................................................................ 30 2.2.2 Microsoft Office Integration .............................................................. 35 2.2.3 Case Study Exercise ............................................................................ 37

2.3

Advanced Options ......................................................................................... 37 2.3.1 User Options and Personalization .................................................... 37 2.3.2 Record Information and Templates ................................................. 41 2.3.3 Case Study Exercises .......................................................................... 44

2.4

Global Address Book ..................................................................................... 44 2.4.1 Parties and Addresses ........................................................................ 44 2.4.2 Address Books..................................................................................... 46 2.4.3 Case Study Exercise ............................................................................ 47

3

Purchase Management ............................................................................................ 49 3.1

Business Processes in Purchasing ................................................................ 49 3.1.1 Basic Approach ................................................................................... 49 3.1.2 At a Glance: Purchase Order Processing ......................................... 52

VIII

Table of Contents 3.2

Vendor Management .................................................................................... 54 3.2.1 3.2.2 3.2.3 3.2.4

3.3

Product Management in Purchasing .......................................................... 64 3.3.1 3.3.2 3.3.3 3.3.4

3.4

Basics of Purchase Order Processing ............................................... 76 Purchase Order Registration ............................................................ 79 Change Management and Purchase Order Approval .................. 86 Canceling and Deleting Purchase Orders ....................................... 88 Purchase Inquiries and Order Confirmations ................................ 89 Case Study Exercises ......................................................................... 92

Item Receipts .................................................................................................. 93 3.5.1 3.5.2 3.5.3 3.5.4 3.5.5 3.5.6 3.5.7

3.6

Product Categories and Procurement Categories ......................... 64 Basic Product Data ............................................................................. 66 Purchase Price Setup ......................................................................... 71 Case Study Exercises ......................................................................... 76

Purchase Order Management ...................................................................... 76 3.4.1 3.4.2 3.4.3 3.4.4 3.4.5 3.4.6

3.5

Vendor Records .................................................................................. 54 Payment Terms and Cash Discounts............................................... 59 Ledger Integration ............................................................................. 62 Case Study Exercises ......................................................................... 63

Basics of Item Receipts ...................................................................... 93 Receipts Lists ...................................................................................... 94 Inventory Registration....................................................................... 94 Product Receipts................................................................................. 98 Partial Delivery, Underdelivery, and Overdelivery.................... 100 Order Status and Inquiries.............................................................. 102 Case Study Exercises ....................................................................... 105

Invoice Receipts ........................................................................................... 106 3.6.1 Processing Vendor Invoices ............................................................ 106 3.6.2 Order Status and Inquiries.............................................................. 111 3.6.3 Case Study Exercises ....................................................................... 113

3.7

Vendor Credit Notes and Item Returns ................................................... 114 3.7.1 Crediting and Returning ................................................................. 114 3.7.2 Credit Notes without Item Return ................................................. 116 3.7.3 Case Study Exercise ......................................................................... 117

3.8

Purchase Agreements, Requisitions, and Quotation Requests ............. 118 3.8.1 3.8.2 3.8.3 3.8.4

Purchase Agreements ...................................................................... 118 Purchase Requisitions ..................................................................... 119 Requests for Quotation.................................................................... 121 Case Study Exercise ......................................................................... 124

Table of Contents 4

IX

Sales and Distribution ............................................................................................ 125 4.1

Business Processes in Sales and Distribution ........................................... 125 4.1.1 Basic Approach ................................................................................. 125 4.1.2 At a Glance: Sales Order Processing .............................................. 128

4.2

Customer Management ............................................................................... 130 4.2.1 Core Data in the Customer Records ............................................... 130 4.2.2 Case Study Exercise .......................................................................... 133

4.3

Product Management in Sales .................................................................... 134 4.3.1 Product Data and Sales Categories................................................. 134 4.3.2 Sales Price and Discount Setup ....................................................... 135 4.3.3 Case Study Exercises ........................................................................ 140

4.4

Sales Order Management ............................................................................ 141 4.4.1 4.4.2 4.4.3 4.4.4 4.4.5 4.4.6 4.4.7

4.5

Delivery Management ................................................................................. 157 4.5.1 4.5.2 4.5.3 4.5.4 4.5.5

4.6

Basics of Picking and Shipping ....................................................... 157 Pick Form and Picking Lists ............................................................ 159 Picking Workbench .......................................................................... 162 Packing Slips...................................................................................... 164 Case Study Exercises ........................................................................ 166

Sales Invoices ................................................................................................ 167 4.6.1 4.6.2 4.6.3 4.6.4

4.7

Basics of Sales Order Processing..................................................... 141 Sales Quotations ................................................................................ 142 Sales Order Registration .................................................................. 144 Order Prices and Discounts ............................................................. 151 Surcharge Management ................................................................... 153 Sales Order Confirmations .............................................................. 155 Case Study Exercises ........................................................................ 156

Sales Order Invoices ......................................................................... 167 Collective Invoices ............................................................................ 168 Free Text Invoices ............................................................................. 170 Case Study Exercises ........................................................................ 172

Sales Credit Notes and Item Returns ........................................................ 173 4.7.1 Return Order Management ............................................................. 173 4.7.2 Simple Credit Notes ......................................................................... 176 4.7.3 Case Study Exercise .......................................................................... 177

4.8

Direct Deliveries ........................................................................................... 177 4.8.1 Processing Direct Deliveries ............................................................ 177 4.8.2 Case Study Exercise .......................................................................... 180

4.9

Trade Allowances and Incentive Management ....................................... 180

X

Table of Contents 4.9.1 4.9.2 4.9.3 4.9.4

5

Trade Allowances ............................................................................ 180 Broker Contracts............................................................................... 187 Royalty Agreements ........................................................................ 188 Vendor Rebates ................................................................................ 188

Production Control ................................................................................................ 189 5.1

Business Processes in Manufacturing ....................................................... 189 5.1.1 Basic Approach................................................................................. 189 5.1.2 At a Glance: Production Order Processing ................................... 192

5.2

Product Management and Bills of Materials ........................................... 194 5.2.1 Product Data in Manufacturing ..................................................... 194 5.2.2 Bills of Materials (BOM) .................................................................. 196 5.2.3 Case Study Exercises ....................................................................... 203

5.3

Resource and Route Management ............................................................ 204 5.3.1 5.3.2 5.3.3 5.3.4

5.4

Production Order Management ................................................................ 221 5.4.1 5.4.2 5.4.3 5.4.4

5.5

Basics of Production Order Processing ......................................... 221 Production Order Registration ....................................................... 222 Processing Production Orders........................................................ 225 Case Study Exercises ....................................................................... 231

Consumption of Material and Resource Capacity .................................. 231 5.5.1 5.5.2 5.5.3 5.5.4

5.6

Working Time Calendars and Templates ..................................... 205 Resource Groups and Resource Management ............................. 206 Routes and Operations .................................................................... 212 Case Study Exercises ....................................................................... 220

Journal Setup and Ledger Integration........................................... 232 Picking Lists ...................................................................................... 233 Resource Usage ................................................................................ 235 Case Study Exercises ....................................................................... 236

Reporting as Finished and Ending Production ....................................... 236 5.6.1 Reporting as Finished ...................................................................... 236 5.6.2 Ending and Costing ......................................................................... 239 5.6.3 Case Study Exercise ......................................................................... 241

5.7

Subcontracting ............................................................................................. 241 5.7.1 External Resources ........................................................................... 241 5.7.2 Purchased Services........................................................................... 242

5.8

Formulas and Batch Production Orders................................................... 245 5.8.1 Formula Management ..................................................................... 245 5.8.2 Batch Production Orders................................................................. 247

Table of Contents 6

XI

Operations Planning .............................................................................................. 249 6.1

Business Processes in Operations Planning ............................................. 249 6.1.1 Basic Approach ................................................................................. 249 6.1.2 At a Glance: Master Planning.......................................................... 250

6.2

Forecasting .................................................................................................... 251 6.2.1 6.2.2 6.2.3 6.2.4

6.3

Master Planning ........................................................................................... 257 6.3.1 6.3.2 6.3.3 6.3.4 6.3.5

7

Basics of Forecasting......................................................................... 251 Forecast Settings................................................................................ 252 Forecasts and Forecast Planning ..................................................... 254 Case Study Exercises ........................................................................ 256 Basics of Master Planning ................................................................ 257 Master Planning Setup ..................................................................... 259 Item Coverage and Item Settings.................................................... 262 Master Planning and Planned Orders............................................ 265 Case Study Exercises ........................................................................ 271

Inventory and Product Management .................................................................. 273 7.1

Principles of Inventory Transactions ......................................................... 273 7.1.1 Basic Approach ................................................................................. 273 7.1.2 At a Glance: Inventory Journal Transactions ................................ 276

7.2

Product Information Management ............................................................ 278 7.2.1 7.2.2 7.2.3 7.2.4 7.2.5

7.3

Inventory Valuation and Cost Management ............................................ 297 7.3.1 7.3.2 7.3.3 7.3.4

7.4

General Product Data ....................................................................... 278 Inventory Dimension Groups ......................................................... 286 Item Model Groups .......................................................................... 291 Transactions and Inventory Quantity ............................................ 292 Case Study Exercises ........................................................................ 297 Valuation and Cost Flow ................................................................. 297 Inventory Closing and Adjustment ................................................ 302 Product Cost Management .............................................................. 304 Case Study Exercises ........................................................................ 309

Business Processes in Inventory ................................................................ 310 7.4.1 7.4.2 7.4.3 7.4.4 7.4.5 7.4.6 7.4.7

Inventory Structures and Parameters ............................................ 310 Inventory Journals ............................................................................ 312 Inventory Counting .......................................................................... 316 Transfer Orders ................................................................................. 319 Item Reservation ............................................................................... 321 Quarantine and Inventory Blocking............................................... 323 Quality Management........................................................................ 325

XII

Table of Contents 7.4.8 Consignment Inventory .................................................................. 327 7.4.9 Case Study Exercises ....................................................................... 330

8

Warehouse and Transportation Management ................................................... 331 8.1

Advanced Warehouse Management ........................................................ 331 8.1.1 8.1.2 8.1.3 8.1.4 8.1.5

8.2

Core Setup for Warehouse Management ...................................... 331 Core Warehouse Processes ............................................................. 342 Advanced Options for Inbound and Outbound Processes ........ 349 Tasks within the Warehouse .......................................................... 357 Case Study Exercises ....................................................................... 364

Transportation Management ..................................................................... 366 8.2.1 Core Setup for Transportation Management ............................... 367 8.2.2 Managing Transportation Processes ............................................. 372

9

Financial Management .......................................................................................... 379 9.1

Business Processes in Finance ................................................................... 379 9.1.1 Basic Approach................................................................................. 379 9.1.2 At a Glance: Ledger Journal Transactions .................................... 380

9.2

Core Setup for Finance ............................................................................... 381 9.2.1 9.2.2 9.2.3 9.2.4 9.2.5 9.2.6 9.2.7 9.2.8

9.3

Transactions in Finance .............................................................................. 401 9.3.1 9.3.2 9.3.3 9.3.4 9.3.5

9.4

Fiscal and Ledger Calendars .......................................................... 381 Currencies and Exchange Rates ..................................................... 383 Financial Dimensions ...................................................................... 385 Account Structures and Chart of Accounts .................................. 387 Customers, Vendors, and Bank Accounts .................................... 394 Sales Tax / VAT Settings ................................................................. 395 Basic Setup for Journal Transactions ............................................. 398 Case Study Exercises ....................................................................... 400 General Journals ............................................................................... 402 Invoice Posting ................................................................................. 407 Payments ........................................................................................... 412 Transaction Reversal........................................................................ 416 Case Study Exercises ....................................................................... 417

Ledger Integration....................................................................................... 418 9.4.1 Basics of Ledger Integration ........................................................... 418 9.4.2 Ledger Integration in Inventory..................................................... 420 9.4.3 Ledger Integration in Production .................................................. 423

10

Core Setup and Essential Features ...................................................................... 425

Table of Contents

XIII

10.1 Organizational Structures ........................................................................... 425 10.1.1 Organization Model Architecture .................................................. 425 10.1.2 Organization Units ........................................................................... 426 10.1.3 Organization Hierarchy Structures ................................................ 428 10.1.4 Legal Entities (Company Accounts) ............................................... 430 10.1.5 Cross-Company Data Sharing ........................................................ 432 10.1.6 Sites ..................................................................................................... 432 10.2 User and Security Management ................................................................. 434 10.2.1 Access Control ................................................................................... 434 10.2.2 Users and Employees ....................................................................... 435 10.2.3 Role-Based Security .......................................................................... 438 10.3 Common Settings ......................................................................................... 441 10.3.1 Number Sequences ........................................................................... 441 10.3.2 Calendars ........................................................................................... 443 10.3.3 Address Setup ................................................................................... 444 10.3.4 Parameters ......................................................................................... 444 10.4 Alerts and Workflow Management ........................................................... 445 10.4.1 Alert Rules and Notifications .......................................................... 445 10.4.2 Configuring Workflows ................................................................... 447 10.4.3 Working with Workflows ................................................................ 450 10.5 Other Features .............................................................................................. 452 10.5.1 Document Management .................................................................. 452 10.5.2 Case Management ............................................................................ 454 10.5.3 Task Recorder and Task Guide ....................................................... 457 10.5.4 Mobile App ........................................................................................ 458 Appendix .......................................................................................................................... 461 Setup Checklist ....................................................................................................... 461 Basic Setup.................................................................................................... 461 Other Key Settings and Master Data ........................................................ 464 Commands and Shortcut Keys ............................................................................. 466 Bibliography .................................................................................................................... 467 Literature ................................................................................................................. 467 Other Sources .......................................................................................................... 467 Index ................................................................................................................................. 469

1

What is Microsoft Dynamics 365/AX?

Microsoft Dynamics 365 is a cloud-based business platform for enterprises that comprises the functionality of ERP and CRM solutions. Within Dynamics 365, there are several applications (apps) for the different areas of business. In that regard, Dynamics 365 for Finance and Operation, the solution which is covered by this book, is the application that includes the ERP functionality for mid-sized companies and multinational organizations. Based on state-of-the-art architecture, it offers high usability and comprehensive functionality. Initially published with the name Dynamics AX 7 (officially without the version number), Dynamics 365 for Finance and Operations is designed as a cloud-based solution on the Microsoft Azure platform, but an on-premise deployment on customer infrastructure is also possible. The browser-based client in Dynamics 365, which you can run on most operating systems and browsers, replaces the Windows client in previous (Dynamics AX) versions of the application.

1.1

Dynamics 365, Dynamics AX and Axapta

Dynamics 365 for Finance and Operations has been initially developed under the name “Axapta” by Damgaard A/S, a Danish software company. The founders of Damgaard, Erik and Preben Damgaard, have before been co-founders of PC&C, the company that has developed Navision (later “Dynamics NAV”). The first official version of Axapta, version 1.0, has been released in March 1998 for Denmark and the USA. Version 1.5, published in October 1998, has added the country-specific functionality for several European countries. With the release of version 2.0 in July 1999 and version 3.0 in October 2002, Axapta has been introduced in further countries with a wide range of functional enhancements. Based on a merger agreement in November 2000, Damgaard A/S united with the local rival Navision A/S, a successor of PC&C. Microsoft subsequently acquired Navision-Damgaard in May 2002 and accepted the main products of this company, Navision and Axapta, as core business solutions in the software portfolio. Navision has been positioned as the solution for small, Axapta for large companies. With version 4.0 in June 2006, Microsoft has rebranded Axapta to Dynamics AX. Apart from functional enhancements, Dynamics AX 4.0 has introduced a redesigned user interface with a Microsoft Office-like look and feel. Dynamics AX 2009, which has included the role centers, the workflow functionality, and an updated user interface as core innovations, has been published in June 2008. This version has also added substantial functional features

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_1

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1 What is Microsoft Dynamics 365/AX?

(including the multisite foundation and new modules) that ensure end-to-end support for the supply chain requirements of global organizations. Dynamics AX 2012, which has been published in August 2011, has introduced a further update of the user interface with list pages and action panes across the whole application. The role-based security, the accounting framework with segmented account structures, the enhanced use of shared data structures, and other features have facilitated the collaboration across legal entities and operating units within the application. Updated versions of Dynamics AX 2012 have been released later: The Feature Pack in February 2012 (adding industry features for retail and process manufacturing), R2 in December 2012 (adding data partitions, additional country features, and Windows 8 support), and R3 in May 2014 (adding the advanced warehouse and transportation management solution). In March 2016, the first version of the current solution (a cloud-based application with a web client) has been published with the name Dynamics AX 7. In comparison to Dynamics AX 2012, the technical foundation has been completely new, but there have not been many changes in the functionality. In line with the principle of a cloud-based solution, technical and functional updates are introduced continuously. Examples of functional and technical enhancements are the on-premise version and the mobile app in July 2017. With the integration into the Dynamics 365 platform in November 2016, the new name “Dynamics 365 for Operations” has been given to Dynamics AX. The final name “Dynamics 365 for Finance and Operations” has been introduced with the update in July 2017.

1.2

Dynamics 365 for Finance and Operations at a Glance

Microsoft Dynamics 365 for Finance and Operations is a business solution that meets the complex requirements of multinational enterprises but is still easy to use. Because of its intuitive user interface, most people feel comfortable with Dynamics 365 from the very beginning. Along with the tight integration of other Microsoft cloud services, this helps to start working in Dynamics 365 easily and efficiently. Dashboards, which are the start page when opening Dynamics 365, grant easy and fast access to all required areas of the application.

1.2.1

Functional Capabilities

The end-to-end support of business processes across the whole organization enables the integration of internal organization units (e.g., companies or departments) and external business partners (e.g., customers or vendors) in Dynamics 365. Multi-language, multi-country, and multi-currency capabilities, the organization model that includes multiple hierarchies of operating units and legal entities, and the option to manage multiple sites within one legal entity, make it possible to manage complex global organizations within a common database.

1.2 Dynamics 365 for Finance and Operations at a Glance

3

The functional capabilities of Dynamics 365 for Finance and Operations include the following main areas:             

Sales and marketing Supply chain management Procurement and sourcing Production control MRP (Material requirements planning / Master planning) Warehouse management Financial management Cost accounting and cost management Budgeting Project management and accounting Service management Human capital management Business intelligence and reporting

In addition to the core ERP functionality, industry-specific features for distribution, manufacturing, retail, services, and the public sector are included in the standard application and provide a broad industry foundation. Local features meet the particular requirements of different countries. By default, applicable local features are controlled by the country of the primary address of the company (legal entity). The integrated reporting features and the option to embed business intelligence reports and visualizations grant a fast and reliable presentation of business data. Business intelligence features are not only available to users in finance and accounting, but to the users in all areas of Dynamics 365 who need to analyze their data.

1.2.2

Implementation

Starting with the release that has been published in July 2017, you can deploy Dynamics 365 for Finance and Operations on Microsoft Azure in the cloud, or onpremise in a data center of your company. The Microsoft Dynamics Lifecycle Services – a portal solution on Microsoft Azure that includes a collaborative environment and continuously updated services for the management of Dynamics 365 deployments – are the starting point for a Dynamics 365 implementation. Microsoft usually does not sell Dynamics 365 directly to customers but offers an indirect sales channel. Customers purchase licenses from certified partners, who provide their services for the implementation. These services include application consulting, system setup, and the development of enhancements.

4

1.2.3

1 What is Microsoft Dynamics 365/AX?

Data Structure

In Dynamics 365, you work with data that describe transactions – for example, the inventory transactions of an item. As a prerequisite for the transactions, you need to manage data which describe the objects in transactions – for example, the item itself. Including the data that control the configuration, there are three data types:  Setup data  Master data  Transaction data Setup data specify the way in which business processes work in Dynamics 365. The setup determines, for example, whether warehouse locations or serial numbers are used. Apart from the development of enhancements, the setup is the primary way to adapt the application to the requirements. Setup data are entered with the initial setup of the application. Later changes need to be checked carefully. Master data describe objects like customers or products. They are not updated periodically, but at the time when there are changes on the object – for example, when a customer changes the delivery address. Master data are entered or imported initially before a company starts working in the application. Depending on the business, there are only occasional updates of master data later on. Transaction data are continuously updated with the activities in business processes. Examples of transaction data are sales orders, invoices, or inventory transactions. Dynamics 365 generates transaction data with every business activity. The registration and the posting of transactions comply with the voucher principle.

1.2.4

Voucher Principle

If you want to post a transaction, you have to register a voucher with a header and one or more lines. Processing a voucher includes two steps:  Registration – Enter the voucher (create the initial document).  Posting – Post the voucher (create the posted document). Vouchers are based on master data – for example, the main accounts, customers, or products. It is not possible to post a voucher as long as it does not comply with the rules that are defined by setup data or given by the internal business logic of Dynamics 365 (which, for example, requires that an inventory transaction has to include a serial number if serial number control is active). Once a voucher is posted, it is not possible to change it anymore. Depending on the setup, approval in a Dynamics 365 workflow may be required before it is possible to post the transaction. Examples of vouchers are orders in sales and purchasing or journals in finance and inventory management. The related posted documents are packing slips, invoices, ledger transactions, or inventory transactions. Note: Some minor vouchers like quarantine orders show an exception regarding the voucher structure – they do not consist of a header and separate lines.

2

Getting Started: Navigation and General Options

One of the core principles of Microsoft Dynamics 365 is to grant an intuitive and smooth user experience. But business software supports business processes that may be quite complex. For this reason, it is important to know the basics.

2.1

User Interface and Common Tasks

Before a description of the business processes in Dynamics 365 in the subsequent chapters, this section gives an overview of the general functionality.

2.1.1

Login and Authentication

Microsoft Dynamics 365 is a cloud-based solution which requires to sign in with a Microsoft Azure Active Directory user account (Microsoft Office 365 account). You can access Dynamics 365 in two different ways:  Web client – Described below, provides full access to all functional areas.  Mobile app – Provides access to functionality which is relevant for users on phones and tablets (see section 10.5.4). In order to access the Dynamics 365 web client, start a supported web browser like Microsoft Edge or Google Chrome and open the web address (URL) of your Dynamics 365 application. The browser subsequently shows the login dialog, in which enter your Azure Active Directory user ID (Email) and password. Settings in your user options determine the current company (legal entity) and the language in Dynamics 365 after logging on. Parameters in the web address of the Dynamics 365 application can override these user settings, and they provide further options. The web address https://XXX.com/?&cmp=FRSI&lng=fr (XXX.com = Dynamics 365 URL), for example, opens the company “FRSI” in French. If you want to log off, click the icon with your user initials on the right of the Dynamics 365 navigation bar and select the option Sign out.

2.1.2

Navigation

There are four ways to access pages and forms in the Dynamics 365 web client:    

Dashboard and workspaces Navigation pane Navigation search Favorites

The Dynamics 365 dashboard (see section 2.1.3) is the default initial page in Microsoft Dynamics 365. It contains all workspaces which are available to the

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_2

6

2 Getting Started: Navigation and General Options

current user. In the dashboard, you can open a workspace, and in the workspace, you can subsequently access the related list pages and detail forms.

2.1.2.1 Navigation Pane The navigation pane provides access to all workspaces, list pages, and forms, for which you have got appropriate permissions. Apart from the Modules pane, which contains all your menu items, and the Workspaces pane, which contains your workspaces, it includes the Favorites pane, in which can place a limited number of menu items for frequent use.

Figure 2-1:

Navigation pane and menu in Dynamics 365

If you want to display the complete navigation pane, press the shortcut key Alt+F1 or click the button (Show navigation pane) on the left of the Dynamics 365 client. Dynamics 365 then shows the following navigation elements (see Figure 2-1):       

Navigation bar [1] Navigation pane [2] Favorites [3] Recent [4] Workspaces [5] Modules [6] Menu for the selected module [7]

If you want to view the navigation pane [2] permanently, click the button (Pin navigation pane open) on the right of the navigation pane. If you want to collapse the navigation pane again, click the button (Collapse the navigation pane) which is shown on the right of the navigation pane then.

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2.1.2.2 Modules and Menu Structure The structure of the modules complies with functional areas like Accounts payable or Production control and refers to standard roles in the industry. The modules Organization administration and System administration include basic settings and tasks which are not related to a specific functional area. The Common module contains menu items which not related to a functional role, but which are relevant for all users. These menu items include the Global address book (see section 2.4), the Work items (workflow management, see section 10.4.3), the Cases (see section 10.5.2), and the Document management (see section 10.5.1). Within each module, the menu shows all menu items that you can access. The menu items and folders in the menu comply with the following common structure: The first folder in the menu is the folder Workspaces. It is only shown if the selected module contains one or more workspaces and displays all workspaces that refer to the selected module. Below the workspaces, there are folders and menu items which provide access to pages for frequent tasks in the particular module (e.g., the vendor management in the Accounts payable module). The folder Inquiries and reports contains menu items for analysis and reporting. Inquires show the result directly on the screen whereas reports generate a printout on paper. For reports, you can also select to display a print preview or to save the output to a file instead of a printed hard copy. The folder Periodic tasks contains items, which are not in use every day – for example, the menu items for summary updates or month end closing. Depending on the module, one or more Setup folders provide access to the configuration data of the particular module. Configuration data are entered when initially setting up a company (legal entity). Later on, configuration data are only updated if changes in the business require changes in the setup. Some settings should not be changed without a deep knowledge of the Dynamics 365 functionality. For this reason, the permissions for the Setup folders usually are set in a way that regular users cannot edit sensible configuration data.

2.1.2.3 Recent Pages The folder Recent in the navigation pane contains the workspaces and pages which you have visited most recently. Dynamics 365 automatically adds menu items to this folder based on your browsing history. The items in the folder Recent provide a fast way to return to a form which you have accessed recently.

2.1.2.4 Navigation Search The navigation search is a way to access menu items by typing the name or part of the name (similar to the search feature in Windows 10).

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2 Getting Started: Navigation and General Options

If you want to open the navigation search, press the shortcut key Alt+G or click the search button in the navigation bar. In the search field, enter the page title or a part of the navigation path. You can limit the text, which you enter, to the first characters of the words of the page title or the navigation path – for example, the page All purchase orders is shown as the first result when you type “al pu” in the navigation search. In the drop-down dialog that pops up automatically, click on the respective menu item or simply press the Enter key to access the page.

Figure 2-2:

Using the navigation search

2.1.2.5 Favorites and Shared Links Whereas the structure of the modules and menu items in the navigation pane is given, the personal Dynamics 365 favorites provide an option to collect menu items according to the preferences of the individual user. If you want to add a workspace or a page to your Dynamics 365 favorites, open the navigation pane and move the mouse to the menu item which you want to add to the favorites. A click on the empty star which is shown then on the right of the menu item adds it to the favorites. A full star on the right of the menu item indicates that it is included in the favorites.

Figure 2-3:

Adding a menu item to the Dynamics 365 favorites

Once a menu item included in the favorites, it is shown in the Favorites folder at the top of the navigation pane. If you want to remove an item from the favorites, click on the full star that is shown on the right of the item. Apart from the favorites within Dynamics 365, you can use shared links to access particular Dynamics 365 forms. In all list pages and forms, there is the button

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OPTIONS/Share/Get a link in the action pane. If you click this button, a dialog with the web address of the current form is shown. You can copy this link and send it to other users of Dynamics 365 in your enterprise, or add it to the favorites or the start page of your browser.

2.1.2.6 Switching the Current Company You can use the company lookup, which you open with a click on the company field in the navigation bar or with the shortcut Ctrl+Shift+O, if you want to switch from one legal entity to another. Once you select a company in this lookup, Dynamics 365 immediately switches to this company.

Figure 2-4:

Switching the current company

2.1.2.7 New in Dynamics 365 Compared to Dynamics AX 2012, the browser-based interface, which replaces the Windows client, provides completely new options for the navigation. Apart from minor modifications in the menu structure, which eliminate the rigid structure of the Common and the Setup folder in various modules, core changes include the dashboard (replacing the role center), the workspaces, and the navigation search. There is no address bar within the Dynamics 365 web client, but you can use the address bar of the browser. The favorites do not support a menu structure anymore.

2.1.3

Elements of the User Interface

Microsoft Dynamics 365 contains following types of standard pages:     

Dashboard Workspaces List pages Detail and transaction forms Journals, inquiries, and setup forms

This section explains the elements in these pages.

2.1.3.1 Dashboard The dashboard, which is the start page in Dynamics 365, includes all your workspaces and is designed to give an overview of your work. The default dashboard contains the following elements (see Figure 2-5):  Navigation bar [1] – Described below.  Company banner [2] – Specified in the company setup (see section 10.1.4).

10    

2 Getting Started: Navigation and General Options Navigation pane [3] – Collapsed in Figure 2-5. Calendar [4] – Determines the session date. Work items [5] – Refer to the workflow management (see section 10.4.3). Workspaces [6] – For the different functional areas.

Workspace tiles, for example the tile Bank management in Figure 2-5, provide access to the related workspaces. The calendar in the dashboard highlights the Session date, which is the default value for the posting date in the current session. The initial value for the session date is the current date, but you can temporarily set it to a different date – click on the respective date in the dashboard calendar or select the date in the menu item Common> Common> Session date and time.

Figure 2-5:

The Dynamics 365 dashboard

The button Finance and Operations on the left of the navigation bar provides the option to return to the dashboard (initial page) from every workspace or form. Note: You can select an alternative page (e.g., the employee self-service portal) instead of the dashboard as Initial page on the tab Preferences in your user options.

2.1.3.2 Navigation Bar The navigation bar at the top of the Dynamics 365 web client contains the following buttons for global Dynamics 365 features (see Figure 2-6):      

Dynamics 365 task pane [1] – Access to Office 365 and Dynamics 365 apps. Finance and Operations [2] – Return to the initial page (dashboard). Company lookup [3] – Switch between companies, see section 2.1.2. Navigation search [4] – See section 2.1.2. Messages [5] – See section 2.1.4. Feedback [6] – Feedback to Microsoft.

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 Settings [7] – User options and other general settings.  Help & Support [8] – See section 2.1.6.  User initials [9] – Sign out. The options within the button Settings [7] include the User options (see section 2.3.1), the Task recorder (see section 10.5.3), the Mobile app management (see section 10.5.4), the Trace (capturing a trace for problem diagnosis and performance analysis), and the Dynamics 365 product information (About).

Figure 2-6:

Navigation bar in Dynamics 365

2.1.3.3 Workspaces The dashboard, and the folder Workspaces in the navigation pane, contain all workspaces for which you have got appropriate permissions. Workspaces are designed as a starting point for the daily work in a particular job. They are pages which collect all the information and functionality required to perform this job. In the example of the workspace Purchase order receipt and followup in Figure 2-7, a list of delayed receipts is shown in the center. Tiles on the left and the right of this workspace provide access to connected forms and indicate the related number of records, for example the orders that are not yet invoiced.

Figure 2-7:

Workspace for purchase order receipt and follow-up

In general, a workspace contains the following panes (compare Figure 2-7):    

Summary pane [1] Tabbed list pane [2] Optional further panes [3] Related links [4]

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2 Getting Started: Navigation and General Options

The tabbed list pane [2] in the center of a workspace is the main place for the daily work. If you select a list on the left [5] of this pane, the grid on the right [6] displays the related list of records. The filter field above the grid provides the option to enter a filter. A click on a key field (shown as a link) in the grid immediately opens the related detail form. Depending on the particular workspace, buttons in the action pane [7] and, if applicable, in the toolbar above the grid in the tabbed list pane [2] (the example in Figure 2-7 does not include such a toolbar) provide the option to execute actions immediately. Tiles are rectangular buttons which open pages (in the same way as a menu item button), and optionally display data like counts or key performance indicators. The summary pane [1] on the left contains tiles which provide the option to start new tasks or to access pages which are important in connection with the selected workspace (e.g., purchase orders in Figure 2-7). Depending on the particular workspace, there are further panes [3] on the right of the tabbed list pane, which contain tiles, charts, or graphs. The rightmost pane [4] in the workspace contains links to further pages related to the selected workspace.

2.1.3.4 List Pages A list page shows the list of records in a Dynamics 365 table. It is primarily designed for viewing records, but you can activate the edit mode to edit records immediately and you can execute tasks on the selected record with the buttons in the action pane.

Figure 2-8:

Elements of the customer list page (in read mode)

While list pages have got a common structure, the particular elements and features are depending on the respective page. The common structure includes the following basic elements (see Figure 2-8):

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   

Action pane [1] – Contains the action buttons. Filter options [2] – Include filter button and quick filter field (see section 2.1.5). Grid [3] – Displays the list of records. Grid checkboxes [4] – Select one, or multiple, or, with the checkbox in the header line, all records.  Scrollbar [5] – Scroll through records (alternatively press the shortcut keys PgUp, PgDn, Ctrl+Home, and Ctrl+End).  FactBoxes [6] – Show additional information on the selected record (e.g., the primary address of the customer) in the Related information pane on the right. If you activate the edit mode with the button Edit in the action pane, you can update record data immediately in the list page. In case the full action pane is displayed, and you need additional space, click the button (Collapse) on the bottom right of the action pane. Once collapsed, the action pane automatically expands whenever you click an action pane tab (e.g., CUSTOMER in Figure 2-8). If you want to show the full action pane permanently, click the button (Pin open) on the bottom right of the action pane when expanded. If the Related information pane is collapsed and you want to view the FactBoxes [6], press the shortcut Ctrl+F2 or click on the collapsed Related information pane on the right. If needed, you can collapse the Related information pane with the button at the top of the pane then. As a prerequisite for the use of FactBoxes, the FactBoxes have to be activated in the system administration (System administration> Setup> Client performance options). List pages are not automatically refreshed when there is an update of the data which are shown on the screen (e.g., if somebody else is changing the records displayed in the list). In order to refresh a list page, press the shortcut Shift+F5 or click the button (Refresh) in the action pane.

2.1.3.5 Action Pane and Action Search The action pane contains buttons to execute activities on the selected record (e.g., enter a sales order from a customer record) and buttons to access connected detail forms (which display more information). The number and functionality of buttons, which may be shown on multiple tabs (e.g., the action pane tabs CUSTOMER or SELL in Figure 2-8), is depending on the particular page. If the window size does not allow to show all action pane tabs, the action pane displays the button on the right which provides access to the hidden tabs. On the right of the action pane, there are some general buttons:    

[Power Apps] – Insert a PowerApp. [Open in Microsoft Office] – See section 2.2.2. [Attach] – Document handling/attachment, see section 10.5.1. [Refresh] – Refresh the screen.

14  

2 Getting Started: Navigation and General Options [Open in new window] – Connected windows, described further below. [Close] – Close the page of form within Dynamics 365 client.

As an alternative to the buttons in the action pane, you can use the action search to execute an activity. Click the search button in the action pane (not in the navigation bar – this would start the navigation search) or press the shortcut key Alt+Q for this purpose, and enter the action name or the action pane button path in the search field. Like in the navigation search, you can limit the entered text to the first characters of the words of the name. You can, for example, use of the action search to access the customer balance from the customer list page as follows: First press the shortcut key Alt+Q, then type “b” and finally press the Enter key.

2.1.3.6 Detail Forms for Master Data Unlike list pages, which are primarily designed for viewing a list of records, the primary use of detail forms is inserting, modifying and viewing the details of individual records.

Figure 2-9:

Elements of the customer detail form (in read mode)

A click on a key field in the grid of a list page (or the Enter key when the field is active) opens the related detail form. Key fields are shown as a link in list pages, usually in the first column of the grid – in the example of Figure 2-8, this is the

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15

column Account. The button OPTIONS/Page options/Change view/Details view in the action pane of list pages provides an alternative way to access the detail form. Detail forms have got a similar structure to list pages, and like in list pages, the specific elements and functions are depending on the particular form. The customer detail form (accessed from the list page Accounts receivable> Customers> All customers) in Figure 2-9 is an example of the structure of detail forms. The common structure of detail forms includes the following basic elements:      

Action pane [1] – Like in list pages (collapsed in Figure 2-9). Filter button [2] – Opens the filter pane (see section 2.1.5). List button [3] – Opens the list pane with the list of records. Tabs [4] – Group fields in line with the functional area. Edit icon [5] – Enables switching to the edit mode (shown in read mode). FactBoxes [6] – Show related information (in the same way as in a list page).

You can expand a tab with a click on the particular tab. If you right-click a tab header, the context menu displays options for expanding or collapsing all tabs at the same time. Summary fields on a tab [5] show core data directly on the tab. If you want to know the field name of a summary field, hover with the mouse over it. In the example of Figure 2-9, you can view the statistics group “02” in a summary field on the tab Miscellaneous details. With the shortcut key Ctrl+F8 and the button Show/Hide list [4] on the left in detail forms, you can show the list pane with the list of records. If you select a record in the list pane, the related detail data are shown immediately, and you can use the list pane to move easily from one record to the next. If the list pane is shown in a form and you want to hide, click the button Show/Hide list again. Section 2.1.4 in this book contains more information on editing records, working with tabs, and other options available in list pages and detail forms. If you want to return from a detail form to the list page, click the Back button of your browser, or press the shortcut Alt+Back Arrow or the Esc key, or click the button (Close) in the action pane of the detail form.

2.1.3.7 Detail Forms for Transaction Data Apart from the detail forms for master data described above, there are detail forms for transaction data (e.g., the sales order form in the example of Figure 2-10). Like in the master data pages, a click on a key field (shown as a link) in the grid of a list page for transaction data opens the related detail form. When you access a transaction detail form, it shows the Lines view. In the lines view, you can view or edit the (order) lines. In the toolbar [3] of the tab Lines, there are buttons for actions on the selected line – for example, the button Remove to delete the record in that line. The action pane [1] at the top of the form provides the option to execute actions at header level – for example, the button Delete to delete a complete order.

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2 Getting Started: Navigation and General Options

If you want to view or to edit details that are not shown in the line grid, expand the tab Line details [4]. The tab Line details contains multiple sub-tabs which structure the fields of the line.

Figure 2-10:

Elements in the transaction detail form for sales orders

Some basic header data are shown on the tab Header in the lines view. The header view, which you can access with the button Header [2] or the shortcut Ctrl+Shift+H, shows all fields of the header record. In the header view, the button Lines (or the shortcut key Ctrl+Shift+L) takes you back to the lines view.

2.1.3.8 Inquiries and Setup Forms In comparison to detail forms, inquiries and setup forms have got a simple layout. In Dynamics 365, there are following types of simple forms:  Simple lists – Contain all fields in the grid (e.g., Accounts receivable> Setup> Customer groups).  Detail forms with list pane – Detail forms, which you can directly access from the menu and which always show the list pane (e.g., Accounts receivable> Payment setup> Terms of payment), include the same functionality as the master data detail forms described above.  Parameter forms – Show a table of contents on the left and correlated data on the right (e.g., Accounts receivable> Setup> Accounts receivable parameters).

2.1.3.9 Connected Browser Windows Connected browser windows provide the option to view related information side by side, for example, if you want to view the related vendor transactions when scrolling the vendor records.

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In the example of vendor transactions, open the vendor list page (Accounts payable> Vendors> All vendors) and click the button VENDOR/Transactions/Transactions in the action pane. In the vendor transactions, click the button (Open in new window) in the action pane. The vendor transactions are subsequently shown in a new browser window. The new browser window is dynamically linked to the main browser window, which is showing the previous form (the vendor list page in the example). Moving from one vendor to another in the main window then automatically updates the data shown in the connected transaction window.

2.1.3.10 New in Dynamics 365 Compared to Dynamics AX 2012, the design principles of the browser-based user interface in Dynamics 365 enforce a “flat” design. For this reason, all forms are shown in the main browser window and not in separate windows. All Dynamics 365 web client forms include the action search, and the edit mode is also available in list pages. The list pane in detail forms replaces the AX 2012 grid view. There is no command bar, no preview pane, and no status bar. General options of the AX 2012 command bar are included in the navigation bar now, form-specific features in the tab OPTIONS of the action pane. Tiles in workspaces replace the cues in AX 2012 role centers.

2.1.4

Working with Records

In Microsoft Dynamics 365, you can work with the mouse, but you can also use the keyboard for most actions. Apart from shortcut keys, the navigation search and the action search enable fast data input without a mouse. In the context menu, which you can open from the fields in a detail form or list page, the option View shortcuts shows all available shortcuts (open the context menu with the shortcut Ctrl+F10 or a right-hand click on a field label). In the appendix of this book, you can find an overview of basic shortcut keys in Dynamics 365.

2.1.4.1 Structure of Pages and Forms When you open a form, no matter whether you access it with a tile or a link in a workspace or with a menu item in the navigation pane, Dynamics 365 shows the related list page. List pages are the starting point for the work in a particular area. You can search and filter records in a list page, and buttons in the action pane provide the option to edit, delete, and insert data according to your permissions. List pages only contain a limited number of fields. Detail forms include all available fields of the selected record. If you want to access the detail form from a list page, click on the corresponding key field (shown as a link in the grid). You can expand a tab in a detail form with a simple click on the tab or – after switching to the particular tab with the Tab key – with the Enter key. If you want to

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2 Getting Started: Navigation and General Options

collapse a particular tab, click the tab header again (or press the shortcut key Alt+0). Further options are shown after a right-hand click on a tab. If you expand all tabs, you can easily scroll the complete record (e.g., with your mouse wheel) without additional mouse clicks. Some tabs contain less important fields, which are not immediately shown when you expand the tab. You can show these fields with the link Show more fields in such tabs.

2.1.4.2 Edit Mode and Read Mode When you open a list page or a detail form, by default it is shown in Read mode (also called “View mode”) to prevent unintended changes of data. In read mode, each field shows the edit icon on the right when you select the field. Click on this icon if you want to switch to the Edit mode in which you can update records. Apart from the edit icon, you can also use the F2 key or the button Edit in the action pane to switch to the edit mode. If the edit mode is active in a list page and you access the related detail form, the detail form is also opened in edit mode. If you want to return to the read mode, press the F2 key again (or click the button OPTIONS/Edit/Read mode). If you want to start a particular form always in edit mode, click the button OPTIONS/Personalize/Always open for editing in the action pane of the form. In addition, you can set your general default mode to the Edit mode or to the Read mode, (setting in the field Default view/edit mode on the tab Preferences in your user options).

2.1.4.3 Inserting Records If you want to insert a record in a list page or a detail form, press the shortcut key Alt+N or click the button New in the action pane. Apart from list pages and detail forms, some workspaces also include the option to create records (there is a corresponding button in the action pane in this case). In many forms, a Quick create dialog (see Figure 2-11) is shown on the right when you create a new record. This dialog contains the core fields of the record and helps to insert records in a fast way. Once you close the dialog with the button Save at the bottom, Dynamics 365 opens the related detail form in which you can enter additional data. Depending on the page, the button Save and open with further options is shown in the dialog. You can use this button, for example, to switch from the Create customer dialog directly to the sales quotation. If there is no Quick create dialog in a particular page, inserting a new record opens the detail form with an empty record, in which you can enter the data. If you use a template (see section 2.3.2), the new record is not empty but receives a default for the content of the fields from the template. In the lines of a transaction form (e.g., in the sales order lines), you can press the Down Arrow key in the last line of the grid to create a new record.

2.1 User Interface and Common Tasks

Figure 2-11:

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Quick create dialog for a new customer

2.1.4.4 Editing Data Before you can edit a record in a list page or detail form, you have to make sure that you are in the edit mode. In order to switch between the fields of the form, you can use the mouse, or the Tab key, or the shortcut key Shift+Tab. If you have started to insert a record with a mandatory field and you want to abort the insert, you might have to delete the record as described below even if you have not entered anything. Alternatively, press the Esc key and close the form without saving. If you are in a Quick create dialog, click the button Cancel at the bottom. You can manually save a record with the shortcut key Alt+S (or Ctrl+S), or with the button Save in the action pane. But it is not required to save a record explicitly. Dynamics 365 saves every change of a record automatically when you leave the record – switching to another record or closing the form with the Back button of the browser or with the button (Close) in the action pane. If you close a form with the Esc key, a dialog asks whether you want to save the changes. If you have entered or modified data and you do not want to save the update, press the shortcut key Ctrl+Shift+F5 or click the button OPTIONS/Edit/Revert to restore the record from the database. But this is only possible as long as the changes have not been saved already manually or automatically (e.g., by moving to another record). Another option not to save changes is to close the form with the Esc key or the shortcut key Alt+Shift+Q (as long as the changes have not been saved already).

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2 Getting Started: Navigation and General Options

2.1.4.5 Deleting Data You can delete the content of an input field with the Delete key. If you want to delete a complete record, select the record and click the button Delete in the action pane (or press the shortcut key Alt+Del or Alt+F9). In some cases, Dynamics 365 is showing an error message which prevents deleting a record – for example, if you want to delete a customer with open transactions.

2.1.4.6 Elements in a Detail Form In list pages and detail forms, there are the following elements shown in Figure 2-12 on the example of the bank account detail form (Cash and bank management> Bank accounts> Bank accounts):  Field groups [1] – Group fields by functional areas.  Mandatory fields [2] – Show a red frame and the Required field indicator . You have to enter the required content before you can save the record.  Sliders [3] – Sliders and checkboxes are used for a binary choice (Yes/No). If you want to select a checkbox (or to set a slider to “Yes”), click it with the mouse or press the Spacebar key while the cursor is on the field.  Date fields [4]  Lookup fields with a fixed list of values [5]  Lookup fields with a related main table [6]

Figure 2-12:

Types of fields in the bank account detail form

Date fields contain a calendar icon which you can use to select a particular date. Your user options determine the format of date and number fields (setting in the

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field Date, time, and number format on the tab Preferences). If you enter a date manually, date separators like “.” or “/” are not required. For a date in the current year, you can enter only the day and month (e.g., “0523” if you use the US date format). If you want to insert the current date, you can alternatively type the character “t” (or “d” for the session date).

2.1.4.7 Lookup Fields and Table Reference In a lookup field, you can only enter or select a value which is included in a predefined list of values. With regard to the setup of this list of values, there are two types of lookup fields:  Lookup fields with a fixed list of values, which is given by Dynamics 365 enumerable types (Enums) – for example, Bank account status [5] in Figure 2-12.  Lookup fields with a related main table, which contains permitted values – for example, Bank groups [6] in Figure 2-12. In edit mode, both types of lookup fields show the lookup button on the right of the field. Lookup fields with a related main table are shown as a link (similar to Internet links) both in edit and in read mode. This link provides direct access to the corresponding main table form (bank group form in the example of Figure 2-12). When you type characters in a lookup field, the value lookup automatically opens, using the typed characters as a filter on the key field of the related table. In many lookups, this filter additionally includes the column Name. If you enter, for example, the character “U” in the field Customer account of a sales order, the value lookup that pops up automatically shows all records which start with “U” in the customer number or name. If you want to open a value lookup manually, select the field and click the lookup button on the right of the field (or press the shortcut key Alt + Down). In the value lookup, you can select a record with a simple mouse click (or with the Enter key once the respective line in the lookup is active). If a value lookup is showing numerous lines and you want to reduce the number of lines which are displayed, you can use the grid filter and the sorting options described in section 2.1.5. In the example of Figure 2-12, you can click on the column header field Name in the lookup to enter a filter on the bank group name. In addition to the value lookup, the table reference of fields with a related main table provides the option to access the detail form of the related main table directly. If you want to insert a new bank group in the example of Figure 2-12, you can open the bank group form directly from the field Bank group. For this purpose, the table reference is shown as a link that you can use to access the related detail form with a mouse click. Alternatively, you can access the related detail form with the option View details in the context menu of the field. In order to open the context menu, select the field and press the shortcut key Ctrl+F10, or right-click the lookup button or the field label (not the field itself).

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2 Getting Started: Navigation and General Options

After opening the related detail form, you can edit records the same way as after accessing the form from the navigation pane. Apart from using the table reference as an easy way to insert and edit related data, you can use it to view the details of related records – for example, to access the related sales order directly from a line in the invoice inquiry.

2.1.4.8 Product Information Dialog In some forms, for example in the sales order or the purchase order form, the link (and the option View details) in the item number field does not open the item form (released product form), but the Product information dialog. This dialog displays the core data of the item. In many cases, these core data are sufficient, and you don’t need to access the details in the released product form. If you need the released product form, click the link in the field Item number of the dialog to access to released product detail form.

2.1.4.9 Segmented Entry Control A special type of lookup is used in ledger account fields, for example in the lines of financial journals. Since the ledger account is one field with multiple segments (the main account and applicable financial dimensions), there is a specific control for lookup and data entry – the segmented entry control (see section 9.3.1).

2.1.4.10 Message Bar and Message Center If there is an issue with an action that you execute in Dynamics 365 (e.g., if you try to delete a customer with open transactions), an error message is immediately shown in the message bar (below the action pane of the form).

Figure 2-13:

Viewing notifications in the message bar [1] and the action center [2]

If there is an error or a warning that is generated by an asynchronous operation (processing a batch job), the message is sent to the action center (message center).

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The button (Show messages) in the navigation bar then indicates the number of unread notifications, and you can click this button to view the recent messages. The example of Figure 2-13 shows a banner message and – irrespective of this message – messages in the action center.

2.1.4.11 New in Dynamics 365 Compared to Dynamics AX 2012, the layout of the forms has changed because of the browser-based user interface. There are new shortcuts, sliders replace most checkboxes, the value lookup automatically pops up in lookup fields, and the message center replaces the Infolog. Compared to Dynamics AX 7, there is the option to view all available keyboard shortcuts from the context menu.

2.1.5

Filtering and Sorting

In order to work efficiently in tables with numerous records, it is crucial to find the right records quickly. For this purpose, Dynamics 365 includes various features for filtering and sorting in list pages and detail forms.

2.1.5.1 Quick Filter In list pages, the quick filter is the easiest way to enter a filter. When you type characters in the quick filter field, a drop-down dialog, in which you can select the column that you want to use for filtering, pops up automatically.

Figure 2-14:

Selecting the filter column in the drop-down dialog of a quick filter

Once you have activated the filter with the Enter key or with the search button on the left of the quick filter field, the page only shows the records which begin with the characters entered in the filter field. Figure 2-14 shows an example of the use of the quick filter. The filter on customers with a name beginning with the characters “co” is not yet executed.

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2 Getting Started: Navigation and General Options

If you want to clear the filter, click the button on the right of the quick filter field. Alternatively, you can remove the content of the quick filter field and press the Enter key.

2.1.5.2 Filter Pane The filter pane, which is not only available in list pages, but also in detail forms, provides the option to apply multiple filter criteria in parallel. If you want to show the filter pane in a form, click the filter button in the bar on the very left (or press the shortcut key Ctrl+F3). Then enter the characters which you want to use for filtering in the respective field of the filter pane. In the operator selection on the right above the filter field, you can select whether to use these characters together with a “begins with”, “contains”, “is one of”, or one of the other operators. If you want to filter on additional fields, click the link Add a filter field in the filter pane and select the respective field. You can finally activate the filter with the button Apply.

Figure 2-15:

Using the filter pane in a list page

The operator “matches” provides the option to use manual wildcards and filter expressions as described further below. If you want to hide the filter pane, click the filter button on the left again, or select the filter pane with a mouse click and press the Esc key. Hiding the filter pane does not remove the filter. If you want to clear the filter, click the button Reset in the filter pane to remove it.

2.1.5.3 Grid Filter The grid filter, which is available in list pages and the grid of other forms (also in the grid of value lookups), is another option for filtering. You can access the grid filter with a click on the header field of the respective column. Alternatively, select a field in the column of the grid and press the shortcut Ctrl+G. In the drop-down dialog that is displayed next, you can enter the filter. The operator works the same way as described for the filter pane above.

2.1 User Interface and Common Tasks

Figure 2-16:

25

Entering a grid filter in a list page

Once the grid filter is active, you can see the filter icon column header.

next to the particular

A particular feature in the grid filter is the option to use the asterisk (*) wildcard together with the “begins with” operator. With this option, you can, for example, enter “*ab” in a grid filter field to filter on all records which contain “ab” in any part of the field – without the need to change the operator. If you want to clear the grid filter, click on the header field of the respective column to show the grid filter drop-down dialog again. In the drop-down dialog, click the button Clear. Another way to clear the filter is to access the filter pane and to click the button Reset.

2.1.5.4 Advanced Filter The advanced filter in list pages and detail forms provides the option to enter complex filter criteria. You can access the advanced filter, which is shown in a separate dialog on the right, with the shortcut key Ctrl+Shift+F3 or with the button OPTIONS/Page options/Advanced Filter/Sort in the action pane. Like the filter pane, the advanced filter includes the option to set a filter on fields which are not shown in the list page or detail form. When you open the Advanced filter dialog, it shows the most common filter fields of the particular form. If you need to enter a criterion on a field which is not shown in the dialog, insert a record in the dialog (press the shortcut key Alt+N or click the button Add). In the new filter line, enter the filter in the columns Table, Derived table, Field, and Criteria. The fields Table and Derived table in a new line by default contain the base table of the page or form in which you have started the advanced filter. In case of a simple criterion (i.e., not filtering on a related table), you don’t have to change the content of these fields. Then select the field on which you want to apply the filter in the column Field (open the lookup with the lookup button or with the shortcut key Alt + Down) and enter the filter criterion in the column Criteria. If the selected table

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2 Getting Started: Navigation and General Options

field in the filter line is a lookup field, you can use a value lookup in the column Criteria (open the lookup with the button on the right in the field).

Figure 2-17:

Entering filter criteria in the Advanced filter dialog

Once you have entered the filter criteria, close the Advanced filter dialog with the button OK. The filter is activated then, and the page only shows matching records.

2.1.5.5 Saving a Filter If you need particular filter criteria frequently, you can save them in the Advanced filter dialog with the button Modify/Save as. A second dialog then requires to enter a filter name. Saved filters are stored in your Usage data, which means that nobody else can use your saved filters. If you want to use a saved filter, select it in the lookup field Select query of the Advanced filter dialog (see Figure 2-18).

Figure 2-18:

Selecting a saved filter in the Advanced filter dialog

2.1 User Interface and Common Tasks

27

In addition to the filters which you have saved manually, the filter which you have used the last time is saved automatically and is available in every page (select the option Previously used query in the lookup field Select query).

2.1.5.6 Sorting The grid filter in list pages does not only provide the option to filter records, but you can also sort records. If you sort the records in a list page and open the related detail form, the detail form applies the sorting of the list page. Alternatively, you can specify sorting criteria in the Advanced filter dialog. The Advanced filter dialog contains the tab Sorting for this purpose. On this tab, you can enter applicable sorting criteria with table name and field name in one or more lines (similar to a filter criterion).

2.1.5.7 Filter Expressions If you use the quick filter in a list page, the page shows all records which start with the characters which you have entered in the quick filter field (in the column, which you have selected for the filter). In all other filter options, you can use further filter expressions. The table below gives an overview of the most important filter expressions. Table 2-1: Meaning

Essential filter expressions Sign

Example

Explanation

Equal

=

EU

Field content matches “EU”

Not equal

!

!GB

Field content does not match “GB”

Interval

..

1..2

Field content from “1” to “2” (incl.)

Greater

>

>1

Field content greater than “1”

Less

<

System parameters, tab Help).

2.1.6.1 Accessing Help As shown in Figure 2-19 on the example of the Item model group, you can view a short help after pointing the mouse on a field label. If you want to access the full help content, click the button /Help in the navigation bar. The help pane subsequently displays the links to the help articles and the task guides that refer to the particular form.

Figure 2-19:

Viewing the Dynamics 365 help in the released product form

2.1 User Interface and Common Tasks

29

2.1.6.2 Custom Help with Task Guides The task recorder (see section 10.5.3) provides the option to create recordings which are based on the particular business processes in your enterprise. If you save a recording to a Lifecycle Services (LCS) Business Process Library that is selected on the tab Help in the system parameters, the recording is subsequently shown on the tab Task guides in the help pane of the related forms.

2.1.6.3 New in Dynamics 365 Compared to Dynamics AX 2012, the help system has completely changed.

2.1.7

Case Study Exercises

Exercise 2.1 – Login and Navigation The first task is to access a Dynamics 365 training environment. In this environment, switch to a company which is different from your default company. Open the list page All vendors, first in the Accounts payable menu in the navigation pane, and then with the navigation search. Check if there are vendors with a name which starts with an “A”. Then open the workspace Purchase order preparation and try to find a vendor with a name starting with an “A”. Finally, log out from Dynamics 365. Exercise 2.2 – Favorites Start a web client session in Dynamics 365, select the training company, and show the navigation pane. Add the list page Released products, which you can find in the menu Product information management, to your favorites. Then open this page from the favorites. Exercise 2.3 – Detail Forms As an example of detail forms in Dynamics 365, review the vendor detail form which you access from the vendor list page (Accounts payable> Vendors> All vendors). Check the details of the vendor in the third line of the list page and show an example of a field group and a lookup field with and without a main table. Then show an example of a slider and a checkbox field. What can you tell about tabs and FactBoxes? How do you proceed if you want to edit the vendor? Is there an option to edit multiple vendors in this form? Exercise 2.4 – Inserting Records Create a new vendor with the name “##-Exercise 2.4 Inc.” (## = your user ID) and any vendor group of your choice. Do not use record templates in this exercise. Notes: If the number sequence for vendor accounts is set to “Manual”, you have to enter the vendor number manually. If the sales tax group or the tax-exempt number (VAT registration number) is mandatory according to the related Accounts

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2 Getting Started: Navigation and General Options

payable parameters settings, switch to the tab Invoice and delivery in the vendor form and enter the required information. Exercise 2.5 – Lookup Fields You want to update the Buyer group of the vendor of exercise 2.4. In the lookup of the corresponding field on the tab Miscellaneous details in the vendor form, you notice that the required group is not there. Create a buyer group B-## (## = your user ID) with the View details option and select this group for the vendor. Exercise 2.6 – Filtering In order to get practice with filtering, enter the filters given below in the vendor list page. Use the quick filter and the grid filter for the first and the second filter task. For the other filter tasks, use the filter pane and the advanced filter. Filter on following criteria one after another and clear the filter after each task:    

All vendors with a name starting with “T”. All vendors assigned to the vendor group that you have selected in exercise 2.4. All vendors with a name which contains “in”. Vendors with a number from US-101 to US-103 or higher than US-108 (use a similar filter if these vendor accounts do not exist).  Vendors with a number that ends with “1” and a name which contains “of”.  Vendors with an “e” on the second character of the name.  Vendors with a name which does not start with “C”. Once you have completed these filter tasks, open the advanced filter and select all vendors who are not assigned to the Terms of payment “Net 30 days”.

2.2

Printing and Reporting

Depending on the requirements, you have got several options for viewing and analyzing data. These options include Dynamics 365 standard reports, Microsoft Office integration, and Business Intelligence tools (including Microsoft Power BI).

2.2.1

Printing Documents

In Dynamics 365, there are the following options for printing:  Print browser pages – Print any list page or form as a web page with the page printing features of your browser.  Download report previews – Print a report to the screen (print preview) and export a PDF or Word file from the preview.  Print reports directly – Send a report directly to a local or network printer. Printing Dynamics 365 pages (that is the content currently shown in the browser) from the browser, which works like printing any other web page, does not require any print setting in Dynamics 365. The print layout may be different in different browsers (Microsoft Edge, Google Chrome, or other).

2.2 Printing and Reporting

31

Standard reports in Dynamics 365 are formatted documents which are generated with the Microsoft SQL Server Reporting Services (SSRS). When you print a standard report, you can either download a PDF/Word file from the print preview or send the document directly to a local or network printer. If you want to send documents directly to a printer, the Document Routing Agent (or, in on-premise environments, the Print and Document Services feature of the Windows Server 2016) has to be installed and configured.

2.2.1.1 Network Printer Setup In a cloud-hosted Dynamics 365 environment, the Document Reporting Services that are required to print standard reports, are hosted in Microsoft Azure. If you want to connect your printers to the Azure services, you have to install the Document Routing Agent on one or more computers/servers in your network. You can install the Document Routing Agent in the Dynamics 365 network printer form (Organization administration> Setup> Network printers). Click the button OPTIONS/Application/Download document routing agent installer in this form and install the Document Routing Agent application. Then open the document routing agent and click the button Settings in the toolbar of the application. In the settings, enter the Dynamics 365 URL (the URL which you use to access Dynamics 365 in the browser) and the Azure AD Tenant (tenant of your organization in the Azure Active Directory) before you click the button OK and the button Sign In. Finally, click the button Printers and put a checkmark in front of the printers which you want to use in Dynamics 365. The network printer form (Organization administration> Setup> Network printers) shows the printers which have been enabled by one or more Document Routing Agents. In edit mode, select the option “Yes” in the column Active of this form for all printers which should be available in the current company.

2.2.1.2 Printing Standard Reports In each Dynamics 365 module, the standard reports are included in the folder Inquiries and reports. Some list pages and detail forms also contain buttons to start particular standard reports – for example, the button COLLECT/Customer balances/ Statements in the customer list page (Accounts receivable> Customers> All customers) to print a customer account statement. If you open a standard report in the menu, or in a list page or detail form, the report dialog is shown in which you can specify filter criteria and the print destination. In the example of Figure 2-20, you can view the report dialog of the customer list (Accounts receivable> Inquiries and reports> Customers> Customer report) with a filter on the customer group.

32

Figure 2-20:

2 Getting Started: Navigation and General Options

Report dialog for the customer list

It is not possible to enter filter criteria directly in the report dialog. Click the button Filter on the tab Records to include of the report dialog to open a filter dialog for this purpose. The filter dialog for reports works similar to the advanced filter in list pages and detail forms. Apart from filter criteria on the tab Range, there is the option to enter sorting criteria on the tab Sorting. Once you close the filter dialog, the selected filter is shown in the report dialog. The button Change on the tab Destination of the report dialog opens the Print destination dialog, in which you can select the destination for the printout. Once you have entered the print destination and the filter criteria in the report dialog, click the button OK in the report dialog to print the report. The settings in the report dialog are automatically stored in your user options and are used as default when you print the selected report again. You can change the filter criteria and the print destination as required. Table 2-2:

Print destinations for reports

Destination

Explanation

Print archive

Saves the report selection to the print archive

Screen

Shows a report preview on the screen

Printer

Prints the report on the selected printer (available printers are specified in the network printer form as described above)

File

Downloads the report as CSV, Excel, HTML, XML, or PDF file

E-mail

Sends the report to an e-mail recipient

Once you have entered the print destination and the filter criteria in the report dialog, click the button OK in the report dialog to print the report. The settings in the report dialog are automatically stored in your user options and are used as

2.2 Printing and Reporting

33

default when you print the selected report again. You can change the filter criteria and the print destination as required then.

2.2.1.3 Print Preview If you select the option “Screen” as the print destination, Dynamics 365 shows a print preview.

Figure 2-21:

Options in the print preview

The preview contains the following elements (see Figure 2-21):  Switch page [1] – Enter the page number (button Go to) or click the button for the first page , previous page , next page , or last page .  Find [2] – Search text in the report.  Zoom [3] – Zoom in and out.  Refresh [4] – Retrieve current data in the preview.  Export [5] – Export the preview to different file formats (XML, CSV, PDF, HTML, TIFF, Excel or Word).  Print [6] – Send the preview to a printer.  Link [7] – Link to the detail form of the particular field.

2.2.1.4 Print Archive The print archive provides the option to save a report within Dynamics 365. If you want to save a report to the archive, select the print archive as the destination in the Print destination dialog or – if you choose a different destination – set the slider Save in print archive to “Yes”. When saving to the archive, the report with the selected options is stored in the print archive. Based on these saved data, you to reprint the report later. The form Common> Inquiries> Print archive shows your print archive. If you want to access the

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2 Getting Started: Navigation and General Options

print archives of all users, open the menu item Organization administration> Inquiries and reports> Print archive.

2.2.1.5 Post and Print When you post an external document (e.g., an invoice or a packing slip), you need a printout in many cases. For this reason, there is a parameter for printing the corresponding document in most posting dialogs – for example, the slider Print invoice in the posting dialog for sales invoices. The button Printer setup in posting dialogs provides the option to specify the print destination (similar to the options when printing a standard report from the menu).

2.2.1.6 Batch Processing

Figure 2-22:

Settings for batch processing in the report dialog

If the printout of a posted document is required later (e.g., if you have not set the slider Print to “Yes” when posting), you can print it in the inquiry of the document. If you want, for example, to (re-)print a sales invoice, open the sales invoice journal (Accounts receivable> Inquiries and reports> Invoices> Invoice journal), select the invoice, and click the button INVOICE/Document/View/Original preview. If you want to run a particular report (or a periodic activity) at a later time and not immediately, you can submit it to a batch process. For this purpose, expand the tab Run in the background in the report dialog and set the slider Batch processing to “Yes”. Then click the button Recurrence on this tab in the dialog to open a second dialog, in which you can enter the start time and repetitions for the batch job. As a prerequisite for batch processing, at least one batch server has to be set up in the server configuration (System administration> Setup> Server configuration). If you

2.2 Printing and Reporting

35

want to categorize batch jobs, you can use batch groups (System administration> Setup> Batch group). You can check and edit the status of batch jobs in the menu item System administration> Inquiries> Batch jobs.

2.2.1.7 New in Dynamics 365 In cloud-hosted Dynamics 365 environments, the Document Routing Agent is required to connect printers to the Azure services. As a result of the browser-based interface, the regular printing features of the browser replace the Dynamics AX 2012 auto-reports.

2.2.2

Microsoft Office Integration

The Microsoft Office integration in Dynamics 365 makes it easy to exchange data between Dynamics 365 and Office. There are two options for this data exchange:  Static export – Export data from Dynamics 365 to Microsoft Excel.  Opening and editing – Update Dynamics 365 data from Microsoft Office. Apart from the standard workbooks for the update of Dynamics 365 data from Office, you can use your own Excel workbooks to edit Dynamics 365 data in Excel.

2.2.2.1 Static Export to Excel You can use the static export to Microsoft Excel to copy data from the grid of a list page or detail form to an Excel sheet. Any update of data in the Excel sheet has no impact on the data in Dynamics 365.

Figure 2-23:

Selecting the export location in the Excel export feature

In order to execute a static export, open the particular list page or detail form in Dynamics 365 and select the grid checkbox on the left in the lines which you want to export. Alternatively, you can click in the grid while holding the Ctrl key to select lines. You can use the Shift key if you want to select multiple consecutive lines. If you want to select all lines of the grid, select the grid checkbox in the header line.

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2 Getting Started: Navigation and General Options

The button Open in Microsoft Office /Export to Excel in the action pane (or the corresponding option in the context menu, which you can access with a right-hand click on the header line of a grid) starts the export of the selected records to Excel. In the next step, the Export to Excel dialog (see Figure 2-23) is shown. In this dialog, select to download the Excel file to your local computer, or to save it to OneDrive or SharePoint.

2.2.2.2 Opening Data in Excel Unlike the static export, which you can only use to retrieve data from Dynamics 365, the option Open in Microsoft Office enables the use of Excel to update Dynamics 365 data from Excel. In order to start editing data with Excel, open the relevant list page or detail form in Dynamics 365. Then click the button (Open in Microsoft Office) in the action pane and select the appropriate option in the button group Open in Excel. Some forms, for example the general journals (General ledger> Journal entries> General journals), also contain a dedicated button in the action pane for editing in Excel. The Open in Excel dialog is shown next. Select to download the Excel file to your computer, or to save it to OneDrive or SharePoint (like in the static export). Microsoft Excel, which shows up next, includes the Data Connector in the task pane. You have to sign in with your Azure Active Directory account in the Data Connector before you can retrieve data. Once the Dynamics 365 data are shown, you can edit the records and – with the button New in the Data Connector – insert additional records. If required, you can temporarily work offline in Excel. If you want to retrieve current data from Dynamics 365, including new lines with new records, click the button Refresh in the Excel Data Connector. In order to transfer data from Excel to Dynamics 365, click the button Publish. If the Excel workbook contains incorrect data, an error message in the Excel Data Connector shows the issue and prevents the update. You can click the button at the bottom of the Data Connector to view the details of the error message.

2.2.2.3 Document Templates for Excel Integration In addition to the standard Excel worksheets in Dynamics 365, you can create and use your own Excel workbooks for the update of Dynamics 365 data. In order to create such an Excel workbook, open the Excel workbook designer (Common> Office integration> Excel workbook designer) and select the Dynamics 365 table which you want to edit in Excel. In the workbook designer, move the fields which should be included in the Excel workbook from the pane Available fields to the pane Selected fields. Then click the button Create workbook in the action pane to open a dialog which in which you select whether to export the Excel workbook to your local computer, or to OneDrive, or to SharePoint. After logging in to the Excel

2.3 Advanced Options

37

Data Connector, you can immediately update Dynamics 365 data from the new worksheet (like in a Dynamics 365 standard worksheet described above). You can save the Excel worksheet and upload it as document template if you want to make it available as an additional option in the button (Open in Microsoft Office) of the related Dynamics 365 form. Open the document templates (Common> Office integration> Document templates) for this purpose, click the button New in the action pane and upload the Excel file which you have saved before.

2.2.2.4 New in Dynamics 365 The Copy/Paste features in Dynamics AX 2012 have been replaced by the improved and enhanced Microsoft Office integration.

2.2.3

Case Study Exercise

Exercise 2.7 – Printing Print a vendor list (Accounts payable> Inquiries and reports> Vendor reports> Vendors) and select the print preview as the print destination. Then close the print preview and print the vendor list again. Filter on any vendor group of your choice and select a PDF-file as the print destination this time.

2.3

Advanced Options

Before you can log on to Microsoft Dynamics 365, a system administrator must set up your Dynamics 365 user with appropriate permissions. In some areas of the application, a worker record (see section 10.2.2) assigned to your user is required.

2.3.1

User Options and Personalization

Apart from the user options, which contain core personal settings for the user interface, there are enhanced personalization features which enable to configure each form in line with the personal preferences of the individual user.

2.3.1.1 User Options If you want to access your user options, click the button Settings /User options in the navigation bar, or open the menu item Common> Setup> User options (appropriate permissions required). Administrators can access the user options of all users in the user management (System administration> Users> Users, button User options). The tab Preferences in the user options form (see Figure 2-24) contains the following main settings for the user environment:  Company – Company which you access when logging on.  Default view/edit mode – Personal option to set the read mode or the edit mode as the default mode for all pages and forms.  Language – Language of the user interface.

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2 Getting Started: Navigation and General Options

 Date, time, and number format – Personal setting for the display format of date and number fields.  Country/region – Default for the country/region when entering an address.  Document handling – See section 10.5.1.

Figure 2-24:

Managing preferences in the user options form

In addition, you can choose the element size and a color theme on the tab Visual and settings for workflow management (see section 10.4) on the tab Workflow.

2.3.1.2 Usage Data In order to access the usage data form with detailed settings of the particular user, click the button Usage data in the action pane of the user options. These settings, which have been stored automatically or manually, include filter settings, form settings, and record templates (user templates). In the usage data, you can switch from the tab General to the other tabs to view the usage data of a particular area. With the button Data, you can access the details of the particular records in the usage data. It is not possible to modify usage data, but you can delete records in the usage data with the button Delete or the shortcut key Alt+Del. The button Reset on the tab General deletes all usage data of the user.

2.3.1.3 Personalization Setup Apart from modifications in the development environment, which apply to all users, changes of the user interface are also possible at a personal level. For this purpose, each user with appropriate permissions can adjust list pages and forms in line with his requirements.

2.3 Advanced Options

39

In the personalization setup (System administration> Setup> Personalization), the tab Settings determines whether personalization is allowed. On the tab Manage per users, there is the option to override the general settings and to export or import personalizations at the level of individual users. You can select or import personalizations for a group of users (security roles are used as groups for the personalization ) on the tab Apply of the personalization setup.

2.3.1.4 Implicit Personalization In list pages and the grid of other forms, you change the width of columns with your mouse (drag and drop in the header column). Dynamics 365 also stores the setting whether to show the action pane, the tabs, and the FactBoxes in full size or collapsed as a personal setting for each page or form.

2.3.1.5 Explicit Personalization If you need enhanced options to adjust a form according to your personal preferences, you can use the element personalization window and the personalization toolbar (see Figure 2-25). These options are available in every list page, detail form, workspace, and dashboard.

Figure 2-25:

Viewing the personalization window [1] and the personalization toolbar [2]

In order to access the element personalization window, select the option Personalize in the context menu of an element – you can open the context menu with a righthand click on an element label (e.g., a field label) or with the shortcut key Ctrl+F10. In the personalization window of the element (field or button), you can override several standard settings – for example by entering a personal field label, by hiding the element, or by setting the element to read-only. The personalization toolbar, which you can access with the link Personalize this form in the element personalization window or with the button OPTIONS/Personalize/ Personalize this form in the action pane, provides additional personalization options. In order to adjust a form with the personalization toolbar, click the applicable button in the personalization toolbar first and then select the element (field, field group, tab, button) which you want to personalize. Options in the personalization toolbar include the button Select (shows the element personalization window),

40

2 Getting Started: Navigation and General Options

Move (change the location of an element), Hide , Summary (in detail forms, shows the field as summary field on the tab), Skip (skip in the tab sequence), Edit (prevents editing), and Insert (add a field or a PowerApp to the form). If you add a field, select the page area to which you want to add the field first. Then select the respective field (adding multiple fields is possible) in the dialog that is shown next. Settings in the personalization apply immediately. The button Manage in the personalization toolbar provides the option to reset the form to the standard layout (button Manage/Clear) and to export or import the personalization. Apart from changing the layout of list pages and detail forms, you can use the personalization to add a list page to a workspace. For this purpose, click the button OPTIONS/Personalize/Add to workspace in the action pane of the list page and select the appropriate Workspace and the Presentation (tile, list, or link) in the drop-down dialog. Then click the button Configure in the drop-down dialog and select applicable options in the subsequent dialog. Once you have finished the configuration, the list page is shown as an additional list, tile, or link in the – now personalized – workspace. In workspaces, the element personalization window for tiles includes the option to pin a tile to the dashboard. Your dashboard then additionally contains the selected tile, and you can directly access the form that is linked to this tile from the dashboard. It is also possible to create a new workspace via personalization. Use the option Add workspace in the personalization window of the dashboard for this purpose.

2.3.1.6 Custom Fields In addition to the user interface adjustments, personalization includes the option to add fields to database tables. The dialog for adding fields, which you can open with the button Insert/Field in the personalization toolbar as described before, includes the button Create new field (see Figure 2-26).

Figure 2-26:

Creating a new field with the personalization

If you click this button, a second dialog is shown in which you enter the Table name, Name prefix, Type, and Label for the new field. Once you confirm the update, the

2.3 Advanced Options

41

new field is included in the Insert fields personalization dialog, in which you can select the list page or detail form which should display the field. If other users should have access to the new field, they have to use personalization. For this purpose, a system administrator can import personalizations at the level of user groups/roles in the personalization setup (System administration> Setup> Personalization, tab Apply). You can manage all custom fields in the menu item System administration> Setup> Custom fields (select the relevant Table in the list pane on the left).

2.3.1.7 New in Dynamics 365 Compared to Dynamics AX 2012, the personalization has completely changed. It only stores deviations to the standard for layout. For this reason, it possible to keep personalizations even if there are updates of the Dynamics 365 standard application. Compared to Dynamics AX 7, there is the option to manage the personalization at the level of user groups (security roles) and to use the personalization to add custom fields to the database.

2.3.2

Record Information and Templates

The Record information dialog in Dynamics 365 provides access to data and to general features which not directly shown in list pages or detail forms.

2.3.2.1 Options in the Record Information Dialog

Figure 2-27:

The Record information dialog in the customer list page

In order to open the Record information for a record in a list page or detail form, select the record and click the button OPTIONS/Page options/Record info. In the

42

2 Getting Started: Navigation and General Options

Record information dialog that is shown next, you can select to execute the following actions on the selected record:    

Rename – Change the content of the key field in the current record. Show all fields and Database log – View detail data of the current record. Script – Create an insert script with data of the current record. Company accounts template and User template – Create a record template.

Note: Depending on your permissions and the Dynamics 365 configuration, some options might not be available.

2.3.2.2 Renaming The button Rename in the Record information dialog provides the option to change the content of the key field of the selected record. Renaming opens a second dialog, in which you enter the new field content. Processing a request for renaming can be a time-consuming activity. The reason is that all references to the record in Dynamics 365 are updated in parallel. If you modify, for example, a vendor number, the update does not only include the vendor table itself, but also the vendor transactions, the purchase orders, and all other tables which contain the vendor number. But take into account, that the update only includes references within Dynamics 365. Other applications and external partners (e.g., vendors) have to execute the update separately. For this reason, renaming is an exceptional activity which should be coordinated with the system administrator, and which is usually secured by appropriate permission settings.

2.3.2.3 Show All Fields and the Database Log The button Show all fields in the Record information dialog displays the content of all fields of the selected record. You can use this feature if you want to know the content of table fields which are not shown in the regular interface of a particular list page or detail form. The button Database log in the Record information dialog opens a log file which contains the updates of the selected record. As a prerequisite, logging for the particular table has to be enabled in the menu item System administration> Setup> Database log setup.

2.3.2.4 Record Templates Record templates are another option which you can select in the Record information dialog. When you create a new record, you can select a record template to initialize the record with the content of the template. You can, for example, set up a template for domestic vendors and a template for foreign vendors in the vendor form to initialize new vendors with correct posting groups. There are two types of record templates:

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 User templates – Only available to the current user.  Company account templates – Available to all users. A user template is only available to the user who has created it. You can create a user template with the button User template in the Record information dialog. In a second dialog, enter the name and a short description of the template. The new template is a copy of the record which you have selected when opening the Record information dialog. User templates are stored in your usage data, and it is not possible to modify them. If a user template is not required anymore, you can delete it in the usage data. For this purpose, click the button Settings /User options in the navigation bar, then the button Usage data in the user options, and in the usage data switch to the tab Record templates. Alternatively, you can delete a user template with the shortcut key Alt+Del or Alt+F9 in the Template selection dialog shown in Figure 2-28. Company account templates, unlike user templates, are available to all users. You can create a company account template with the button Company accounts template in the Record information dialog. If you want to view or update a company account template later, open the menu item Common> Setup> Record templates. Select the table, to which the template refers, on the tab Overview of the record template form first. Then switch to the tab Templates, in which you can edit or delete the template.

Figure 2-28:

Selecting a template in the Template selection dialog

If there are record templates for a particular form, they are shown in a Template selection dialog whenever you create a record in this table. Figure 2-28 shows the Template selection dialog which is displayed when you create a vendor in the vendor form (Accounts payable> Vendors> All vendors) if there is a vendor template.

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In the Template selection dialog, select the appropriate template and click the button OK to apply it to the new record. You can recognize company account templates by the icon and user templates by the icon . If you do not want to apply a template, select the template “Blank”. In the column on the right of the template selection, you can optionally select a template which you want to make the default template. If you set the slider Do not ask again at the bottom of the Template selection dialog to “Yes”, the default template is used without the template selection dialog when inserting further records. If you want to view the template selection dialog when creating new records again, click the button Show template selection which is displayed in the Record information dialog in this case.

2.3.3

Case Study Exercises

Exercise 2.8 – User Options Review the username and other settings in your user options. In the visual options, select the high-contrast color theme and the small element size. Then select the training company as the company which you access when you log on. Exercise 2.9 – Record Templates Set up a user template which is based on the vendor of exercise 2.4. Then create a new vendor with default data from this template.

2.4

Global Address Book

Dynamics 365 contains a common table with all business partners of your enterprise – internal and external relationships, companies and persons. This common table is the global address book. Business partners are called “Parties” in the global address book. They are shared across companies and include customers, sales leads, vendors, organization units, employees, and other contacts.

2.4.1

Parties and Addresses

Whenever you create a new customer, vendor, or any other kind of party, Dynamics 365 inserts a corresponding record in the global address book. A party, which may contain one or more (postal) addresses and contact data, is not the same as an address – it is an organization or person characterized by its name.

2.4.1.1 Creating Parties in the Global Address Book Depending on permission settings, you can manage all parties in the global address book list page (Common> Common> Global address book). In order to insert a party in the global address book page, click the button New in the action pane. In the new party, the Party ID usually derives from the corresponding number sequence. The party type (lookup field Type) with the options “Organization” and “Person” controls the fields which are displayed in the party form (e.g., the field First name is only shown for persons).

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Enter the party name in the field Name (for an organization) or the fields First name and Last name (for a person) before you register additional data, including the postal address on the tab Addresses and contact data like e-mail addresses and phone numbers on the tab Contact information. Section 3.2.1 in this book contains – on the example of the vendor management – more details on how to manage postal addresses and contact information.

Figure 2-29:

Managing a party with multiple addresses in the party detail form

2.4.1.2 Indirectly Creating Parties Apart from directly creating a party in the global address book, you can indirectly create a party by entering a customer, a vendor, or any other kind of party in any module. In all forms, in which parties are created indirectly, the field Name is a lookup field in which you can search an existing party. If you select a party in this field, this party receives an additional role. If you do not select a party, but type a new name, Dynamics 365 creates a new party with this name automatically. If you insert a new customer in the customer form (Accounts receivable> Customers> All customers) and type a name in the lookup field Name of the Create dialog, a new

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party is created. If you select a party in the lookup field Name, the new role “Customer” is assigned to this party. Since a party may already exist in the global address book (e.g., if a customer is already a vendor in your or an affiliated company within a common Dynamics 365 database), you should – in order to avoid duplicate parties – check the existing parties before creating a new party. In case the duplicate check is activated in the global address book parameters, and you enter a duplicate party anyhow, a confirmation dialog shows the existing party before saving the new party.

2.4.1.3 Internal Organizations Apart from external organizations and persons, internal organizations (e.g., operating units and legal entities, see section 10.1.2) are also parties in the global address book. You can recognize internal organizations by the party type (e.g., “Legal entities”). Party types, which are reserved for internal organizations are not available as an option when you manually enter a party in the global address book.

2.4.2

Address Books

An address book is a collection of party records. You can set up one or more address books in the menu item Organization administration> Global address book> Address books – for example, one address book for sales and one for purchasing.

Figure 2-30:

Conceptual structure of the global address book

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The global address book is the collection of all parties in all companies within a Dynamics 365 database (see Figure 2-30). If you want to link a party to one or more address books, open the lookup of the field Address books on the tab General in the party detail form and put a checkmark in front of the applicable address books. You can use address books for searching or filtering parties, for example with the filter field Address books in the global address book list page, and as a basis for security settings (restrict access to the party records of an address book to teams, see section 10.1.2).

2.4.2.1 Party Roles A role (e.g., “Vendor” or “Customer”) describes the relationship between a party and your enterprise. A party can be assigned to one or more roles in one or more companies. There are two ways of assigning a role to a party:  Indirectly – Entering a record in other areas (e.g., a customer in the customer form) creates a party with the appropriate role in the global address book automatically.  Directly – Buttons in the global address book form (e.g., PARTY/New/Customer) create a record in the selected area (e.g., a customer record) and assign the corresponding role to the selected party. The roles of a party are shown on the tab Roles in the party detail form.

2.4.2.2 Address Book Parameters If the duplicate check is activated in the global address book parameters (Organization administration> Global address book> Global address book parameters, slider Use duplicate check), a dialog shows duplicate party records whenever you try to create a party (directly or indirectly) with the name of an already existing party. In this dialog, you can select whether to use the existing party or to create a new party, which by chance has got the same name as the existing party. Other global address book parameters include the default party type (“Organization” or “Person”) and the name sequence for persons (first/last name). Settings regarding the format of postal addresses and available ZIP/postal codes or cities are specified in the address setup (Organization administration> Global address book> Addresses> Address setup). The tab Parameters in the address setup contains the setting whether a ZIP/postal code has to be entered in the address setup before you can use this code in an address.

2.4.3

Case Study Exercise

Exercise 2.10 – Global Address Book In order to learn the functionality of the global address book, check if you can find the party assigned to the vendor of exercise 2.4.

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Then insert a new party with the name “##-Exercise 2.10” (## = your user ID) and a postal address in London. This new party becomes a vendor in your company later on. What do you do in Dynamics 365?

3

Purchase Management

The primary responsibility of purchasing is to manage the supply of goods and services from vendors. The related process includes the following activities:  Determine material requirements (in operations planning)  Process purchase requisitions, requests for quotations, and purchase orders  Post item receipts and purchase invoices

3.1

Business Processes in Purchasing

Before we start to go into the details, the lines below give an overview of the business processes in purchasing.

3.1.1

Basic Approach

As a prerequisite for procurement, correct master data are required, particularly the vendor and the product data. For purchased services and non-inventoried commodities, it is possible to use procurement categories instead of products.

3.1.1.1 Master Data and Transactions in Purchasing Vendors and products are master data, which are created once and only occasionally updated later. In the course of the purchasing process, planned and actual purchase orders (transaction data) receive default values from vendor and product records (master data). You can override these data in the transaction – for example, if you agree to special payment terms in a particular purchase order. If you modify data in a transaction, it does not update the related master data. If you agree with a vendor on some general changes, for example on new payment terms, you have to update the vendor record accordingly. Based on correct master data, the purchasing process – along with the required predecessor and successor activities – includes the steps shown in Figure 3-1.

Figure 3-1:

Purchase order processing in Dynamics 365

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_3

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3.1.1.2 Material Requirements, Purchase Requisitions, and Requests for Quotation The identification of material requirements is the first step in the purchasing process. Depending on the particular product and on the business processes, there are two alternative origins for purchase orders:  Planned orders – Generated automatically from known demand within Dynamics 365 (e.g., sales orders, production materials, forecasts).  Purchase requisitions – Entered manually for other demand. Planned orders, which are generated in operations planning (master planning, see section 6.3), require accurate figures on inventory quantity, sales orders, purchase orders, and forecasts. In addition, appropriate item coverage settings are necessary. Purchase requisitions are internal documents which ask the procurement department to purchase specific items (like consumables and office supplies). Unlike planned orders, which are created automatically, they are entered manually by the person who needs the material or service. A purchase requisition runs through an approval process workflow before it is released as a purchase order. Requests for quotation are sent to vendors to receive information on prices and delivery times. The purchasing department enters requests for quotation manually or generates them from planned purchase orders or purchase requisitions.

3.1.1.3 Purchase Orders You can create purchase orders either automatically (from planned orders, purchase requisitions, or requests for quotation) or manually. A purchase order consists of a header, which contains the common data of the whole order (e.g., the vendor data), and one or more lines, which contain the ordered items. Once you have completed the order entry, you have to start the approval workflow (in case change management is active). If change management is not active, the status “Approved” is set immediately. After approval, you can optionally post a purchase inquiry and send it to the vendor for validation purposes. Before you can continue with order processing and the product receipt, you have to post a purchase order confirmation. Posting the confirmation means to save it, optionally sending it to the vendor (electronically or as printed document). The purchase order confirmation is stored with its original content, no matter if there is a later modification on the actual purchase order. The status of a purchase order is indicated by the order status and the document status in the order header, and by the posted quantities in the lines. Inquiries, workspace information, and periodic reports provide the option to recognize issues like late shipments.

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3.1.1.4 Product Receipts, Invoice Receipts, and Vendor Payments Once you receive the items or services, you need to record the product receipt in Dynamics 365. Posting the product receipt reduces the open quantity in the purchase order and increases – for inventoried items – the physical quantity in inventory. Together with the item delivery, or at a later stage, the vendor submits an invoice. When you register the invoice in the pending vendor invoice form, invoice control features support matching the invoice with the purchase order and the product receipt. If an invoice does not refer to a purchase order, you can enter it in the pending vendor invoice form or an invoice journal (see section 9.3.2). After posting the invoice, you can record a payment to the vendor manually or as a result of a payment proposal. The calculation of payment proposals is based on the due date and the cash discount period. Payment processing is independent of purchase orders and usually a responsibility of the finance department. You can find a description on vendor payments in section 9.3.3 of this book.

3.1.1.5 Ledger Integration and Voucher Principle Based on the deep integration of finance with the business processes in all areas of Dynamics 365, the inventory and vendor transactions in purchasing are posted to ledger accounts as specified in the setup (see section 9.4). In order to keep track of the whole business process, Dynamics 365 comprehensively applies the voucher principle to transactions: You have to register a transaction in a document (voucher) before you can post it. After posting, it is not possible to modify the document anymore. Figure 3-2 gives an overview of the documents in purchase order processing.

Figure 3-2:

Transactions and posted documents in purchasing

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3 Purchase Management

At a Glance: Purchase Order Processing

The following example demonstrates the main steps in purchase order processing. It starts with creating the order in the workspace Purchase order preparation and shows all transactions directly in the purchase order form. Alternatively, you can create the order from the vendor form, or directly in the purchase order list page. In the workspace Purchase order preparation, which you can access from the dashboard or the Workspaces folder of the Procurement and sourcing menu, click the button New purchase order in the action pane to create an order. The Create purchase order dialog is shown next, in which you select a vendor in the field Vendor account (you can trigger the search in this field by typing the first characters of the vendor name) before you click the button OK. Dynamics 365 then creates an order header with default data (e.g., for the language and the currency) from the selected vendor and opens the purchase order detail form in the lines view. If you are in read mode, click the button Edit or press the F2 key to switch to the edit mode. Then enter the first order line with the item number, quantity, and price on the tab Purchase order lines. When you select the item, the quantity, the price, and other fields are initialized with default values from the item. If you want to enter another line, press the Down Arrow key or click the button Add line in the toolbar of the lines. The button Header (or Lines) below the action pane provides the option to switch between the lines view (see Figure 3-3) and the header view.

Figure 3-3:

Entering a purchase order line

If change management is activated, the Approval status (shown on the right below the action pane) is “Draft” after entering the order. If the order has got this status, click the button Workflow/Submit and process the approval.

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Then click the button PURCHASE/Generate/Confirmation in the action pane to post the purchase order confirmation. If you want to print the purchase order, do not only set the slider Posting in the posting dialog to “Yes”, but also the slider Print purchase order. The button Printer setup in the dialog provides the option to select a printer for the printout (see section 2.2.1).

Figure 3-4:

Confirming and printing the purchase order

When you receive the item, click the button RECEIVE/Generate/Product receipt in the purchase order to post the product receipt. Posting the receipt works similar to the purchase order confirmation described above. But unlike an order confirmation, a product receipt usually is not printed. If there is no prior item arrival registration, select the option “Ordered quantity” in the lookup field Quantity and enter the vendor’s packing slip number in the column Product receipt on the tab Overview of the posting dialog before you click the button OK. The product receipt increases the physical quantity in inventory and updates the order status to “Received”. If you want to post the vendor invoice directly from the purchase order form, click the button INVOICE/Generate/Invoice in the order form. With an action pane and FactBoxes, the form for vendor invoice posting is different from the other posting dialogs. In order to review the totals, check the appropriate FactBox on the right of the form or click the button Totals in the action pane. After entering the vendor invoice number in the field Number (Invoice identification), click the button Post to post the invoice. Invoice posting generates an open vendor transaction (waiting for the payment) and updates the order status to “Invoiced”. Note: If you want to quit the invoice form without saving, delete the pending invoice and do not simply close the form (which would save a pending invoice).

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3 Purchase Management

Vendor Management

Vendor records are required in purchasing and in accounts payable. In line with the deep integration of Dynamics 365, there is one common record for each vendor, which is used in all areas of the application. If you want to restrict access to the fields and field groups of the vendor form, set appropriate permissions.

3.2.1

Vendor Records

In order to check existing vendors or to create new vendors, open the vendor list page in the procurement module (Procurement and sourcing> Vendors> All vendors) or in the accounts payable module (Accounts payable> Vendors> All vendors). Alternatively, use the navigation search to access this page. According to the general structure of list pages, the vendor page shows a list of all vendors. In the vendor detail form, which you open with a click on the link in the field Vendor account of a line, you can view the details of the respective vendor. Apart from the menu items, also the workspace Purchase order preparation provides access to the vendor detail form (use the list Find vendor in the tabbed list pane).

Figure 3-5:

Selecting a vendor in the vendor list page

If you want to update data in the vendor detail form, switch to the edit mode (press the F2 key or click the button Edit in the action pane for this purpose). If already the list page is in edit mode before you access the detail form, the detail form is also opened in edit mode. The vendor detail form contains numerous fields. The following description covers the core data in the vendor record. More information is available in the online help.

3.2.1.1 Entering New Vendors If you want to create a new vendor in the vendor list page or the detail form, press the shortcut key Alt+N or click the button New in the action pane. If templates for vendors are set up, you can populate the fields of the new record from a template (see section 2.3.2).

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Depending on settings in the corresponding number sequence, the unique vendor number in the field Vendor account is assigned automatically or has to be entered manually.

3.2.1.2 Global Address Book Integration The party type (field Type in the field group Identification) on the tab General of the vendor detail form determines if the vendor is a company (organization) or a person. Depending on the party type, the tab General is showing different fields – for example, the fields First name and Last name for the type “Person”. Vendors are parties in the global address book. For this reason, the field Name is a lookup field in which you can select an existing party from the global address book when creating a new vendor. If you enter the name of a new vendor manually, a confirmation dialog is shown in case an existing party has got the same name as the new vendor, and the duplicate check is activated in the global address book parameters. This dialog provides the option to link the vendor to the existing party or to create a new party, which by chance has got the same name. After saving the vendor record, you can use the table reference (View details) in the vendor name field to access the related party in the global address book. As an alternative to the vendor form, you can create new vendors in the global address book (Common> Common> Global address book, see section 2.4) in order to reduce the risk of duplicate party records. In the global address book, it is easy to check if a new vendor is already a party (e.g., if the new vendor is a vendor in an affiliated company) before creating a new record. If the vendor is a party, select the party and click the button PARTY/New/Vendor to convert it to a vendor in the current company. If not, create the party before converting it to a vendor.

3.2.1.3 General Data The search name in the vendor record is initialized with the vendor name, but you can modify it. Apart from the name, mandatory data in the vendor record include the vendor group in the lookup field Group (which usually controls ledger integration, see section 3.2.3) and the Currency on the tab Purchasing demographics (initialized with the accounting currency). Further core fields on the tab General are the Language, which determines the language for printing purchase orders or other documents, and, in case address books are used (e.g., for access control) the Address books linked to the vendor. The display field Vendor hold on the tab Miscellaneous details shows whether the vendor is blocked. If you want to change the hold status, click the button VENDOR/Maintain/On hold in the action pane. The vendor hold status “All” prevents entering or posting any purchase order or other transaction for the vendor. The options “No” and “Never” enable all transactions (“Never” prevents automatic blocking of the vendor after a period of inactivity).

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3.2.1.4 Input Tax Tax settings for the vendor have to be entered on the tab Invoice and delivery. The Sales tax group (VAT group, default from the vendor group) on this tab determines the tax duty depending on the vendor location. A correct sales tax group is necessary to distinguish between domestic vendors, who charge sales tax or VAT, and foreign vendors, who do not. The setup of sales tax groups and the tax calculation depends on the current company and its location. Section 9.2.6 contains more information on the tax setup in Dynamics 365. If your company is located within the European Union and you need to record the VAT registration number of vendors for tax purposes, enter it in the field Tax exempt number (VAT number) next to the sales tax group. Since it is a lookup field, you have to insert a new tax-exempt number in the main table (use the option View details in the context menu, or the menu item Tax> Setup> Sales tax> Tax exempt numbers) before you can select it in the vendor record. The setting Tax exempt number requirement and the Mandatory tax group in the accounts payable parameters (Accounts payable> Setup> Accounts payable parameters, tab General/Vendor) determine whether the tax-exempt number or the sales tax group are mandatory when creating a vendor.

3.2.1.5 Settings for Delivery and Payment The field Delivery terms on the tab Invoice and delivery of the vendor detail form specifies the usual delivery terms of the particular vendor. You can set up the required delivery terms, including a text translation in foreign languages, in the menu item Procurement and sourcing> Setup> Distribution> Terms of delivery. The delivery terms reflect the agreed Incoterms (standardized contractual rules that determine the tasks, costs, and risks for transportation and delivery). The field Mode of delivery below the delivery terms specifies the way of delivery (e.g., “Truck” or “Parcel”). You can set up the modes of delivery in the menu item Procurement and sourcing> Setup> Distribution> Modes of delivery. Delivery terms and modes of delivery are a common setup for vendors and customers. The tab Payment in the vendor detail form contains settings on payment terms and cash discount. You can find more details on these settings in section 3.2.2.

3.2.1.6 Postal Addresses You can manage one or more addresses of a vendor on the tab Addresses of the vendor detail form. Addresses and contact data are stored in the global address book, which is why you can find a party record for each vendor. Address and contact data in the global address book are shared with the other roles of the party (e.g., if the vendor is also a customer or vendor in another company in Dynamics 365).

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In order to enter the postal address of a vendor, click the button Add in the toolbar of the tab Addresses in the vendor form. In the New address dialog that is shown next, enter an identification (which helps to select the right address in the address search) for the address in the field Name or description. If the address is the primary address of the vendor, make sure that the slider Primary is set to “Yes” and the slider Private to “No”. The field Purpose in the Address dialog controls, for which transactions the current address is used as default value. In a primary address, select the purpose “Business”. In an additional address, select an alternative purpose – for example the purpose “Payment” for an alternative payee address whose name is printed on checks. One postal address can have multiple purposes at the same time. If no specific address is specified for a particular purpose, the primary address is used. The form Organization administration> Global address book> Address and contact information purpose shows the available standard address purposes. If required, you can set up additional purposes. Another important setting in a postal address is the Country/region, which is the basis for the address format and reports to the authorities – including sales tax and Intrastat reports. Once you have selected the country code, only postal codes of this country are shown in the lookup of the field ZIP/postal Code. Depending on the settings in the address setup (Organization administration> Global address book> Addresses> Address setup, tab Parameters), postal codes are validated against the ZIP/postal code table when entering an address. If ZIP/postal code validation is activated, you have to insert a new postal code in the ZIP/postal code table before you can enter it in an address. You can access the postal code in the address setup form (open the tab ZIP/postal codes), or with the option View details in the context menu of the ZIP/postal code field. After closing the Address dialog, you can click the button More options/Advanced in the toolbar of the tab Addresses in the vendor form if you want to access further address details. The tab Contact information in the Manage addresses form contains contact data, which are specific to the particular address (e.g., the phone number of the payee address), and not general contact data of the vendor. If a vendor has multiple addresses with the same purpose and you want to specify a default value for a purpose, click the button More options/Set defaults in the toolbar of the tab Addresses in the vendor form.

3.2.1.7 Contact Information In order to enter general contact data of a vendor (e.g., the vendor telephone number or the general e-mail address), click the button Add in the toolbar of the tab Contact information of the vendor detail form. On the tab Purchasing demographics of the vendor detail form, you can select a main contact person in the field Primary

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contact. If you want to specify a new main contact, first enter the data of this person (use the button VENDOR/Set up/Contacts/Add contacts in the vendor form).

3.2.1.8 Features in the Vendor Form The buttons in the action pane of the vendor list page or detail form provide access to various inquiries and activities on the selected vendor:  Action pane tab “VENDOR”: o Contacts – Manage vendor contact persons. o Bank accounts – Manage vendor bank accounts for payment. o Transactions – Show vendor invoices and payments. o Balance – Show the total of open liabilities.  Action pane tab “PROCUREMENT”: o New/Purchase order – Enter a purchase order, see section 3.4.2. o Related information/Purchase orders – View current orders. o Agreements/Trade agreements, Purchase prices, Discounts – View prices and discounts, see section 3.3.3. o Agreements/Purchase agreements – Blanket orders, see section 3.8.1.  Action pane tab “INVOICE”: o New/Invoice – Enter a vendor invoice, see section 9.3.2. o Settle/Settle transactions – Settle invoices, see section 9.2.5. o Related information/Invoice – View posted invoices.

3.2.1.9 Vendor Approval In case an approval workflow for updates in particular vendor fields is required, enable the vendor approval in the accounts payable parameters (Accounts payable> Setup> Accounts payable parameters, tab General/Vendor approval) and set up a workflow with the type “Proposed vendor changes workflow” in the menu item Accounts payable> Setup> Accounts payable workflows. With this setup, updates in the selected vendor fields have to be submitted to the workflow and only after approval, the changes are applied to the vendor. While the approval is pending, the additional button Proposed changes (opens a dialog in which you can view and, if necessary, discard the changes) is shown in the action pane of the vendor form. You can find details on the workflow management in section 10.4.3.

3.2.1.10 One-time Vendors One-time vendors provide the option to keep master data of regular suppliers separate from vendors, who supply items rarely or only once. The tab General/Vendor in the accounts payable parameters includes the vendor number of a vendor who is used as the template for one-time vendors. In addition, there is a separate number sequence for one-time vendors on the tab Number sequences of the parameters.

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If you want to use a one-time vendor in a purchase order, do not select an existing vendor when you create the order (e.g., in the menu item Procurement and sourcing> Purchase orders> All purchase orders), but set the slider One-time supplier in the Create purchase order dialog to “Yes” (see Figure 3-6). With this setting, a new vendor is created in parallel to the order.

Figure 3-6:

Creating a one-time vendor in a new purchase order

The vendor account number of this vendor derives from the number-sequence for one-time vendors, and the checkbox One-time supplier on the tab Vendor profile of the vendor form is selected. If you want to convert the one-time vendor into a regular vendor, clear this checkbox (clearing the checkbox does not change the vendor number).

3.2.1.11 New in Dynamics 365 The vendor approval options have been added with version 8.1 of Dynamics 365.

3.2.2

Payment Terms and Cash Discounts

Unlike other business applications, which include cash discount settings in the payment terms, Dynamics 365 keeps payment terms and cash discounts separately. Payment terms and cash discounts in Dynamics 365 are a common setup for vendors and customers. For this reason, the administration is included in both, the accounts payable and the accounts receivable menu. The calculation of the due date and the cash discount date starts from the document date, which you can enter in an invoice. If you leave the document date empty, Dynamics 365 uses the posting date as the start date for due date calculation. But especially in purchase invoices, the document date may deviate from the posting date. If necessary, modify the due date and the cash discount date when you post an invoice or when you settle it in the Settle transactions form (see section 9.2.5).

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3.2.2.1 Terms of Payment You can manage the payment terms in the menu item Accounts payable> Payment setup> Terms of payment in the accounts payable menu (or Accounts receivable> Payment setup> Terms of payment in the accounts receivable menu).

Figure 3-7:

Settings for the due date calculation in the payment terms

The list pane on the left of this form shows the available payment terms with their ID and description. The settings for the due date calculation of the selected payment term are shown on the right. The lookup field Payment method on the tab Setup determines the start date for due date calculation: “Net” means starting from the document date, “Current month” means starting from month end. The fields Days and Months determine the period length for the due date calculation. If required, you can select a Payment schedule. The button Translations provides the option to enter a longer text in different languages. When you print an external document (e.g., a printed purchase order), the text of the payment terms is printed in the language of the document. If no translation to this language has been entered for the particular payment terms, the content of the field Description of the payment terms is printed.

3.2.2.2 Cash on Delivery If you want to create payment terms for cash on delivery, select the Payment method “COD”, set the slider Cash payment to “Yes”, and select the appropriate petty cash main account number in the field Cash. When you post an invoice with payment terms “Cash on delivery”, the payment, and a settlement of the invoice with the petty cash account in the payment terms, is posted in parallel. There is no open vendor transaction in this case.

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3.2.2.3 Cash Discounts Like the setup of the payment terms, the cash discount setup is included in both the accounts payable menu and the accounts receivable menu (Accounts payable> Payment setup> Cash discounts and Accounts receivable> Payment setup> Cash discounts).

Figure 3-8:

Setting up a cash discount

When you create a new cash discount, you have to enter details that are similar to the payment terms. In addition, you have to specify the cash discount percentage and settings for the cash discount posting to the general ledger. Cash discounts are a common setup in accounts payable and accounts receivable. Nevertheless, the cash discount contains different settings for the posting of the cash discount deduction for vendors and for customers (the settings apply at the time when the payment is posted):  Accounts receivable – Field Main account for customer discounts.  Accounts payable – The main account is depending on the selected option in the lookup field Discount offset accounts of the cash discount: o Use main account for vendor discounts – Posting to the Main account for vendor discounts entered in the field below. o Accounts on the invoice lines – Posting to the accounts of the invoice lines (offsetting part of the invoiced expense amount with the cash discount). If required, you can apply a setup that posts the cash discount to ledger accounts which are depending on the applicable sales tax – enter the applicable main accounts in the fields Vendor cash discount and Customer cash discount of the sales tax ledger posting groups (Sales tax> Setup> Sales tax> Ledger posting groups) for this

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purpose. In this way you can, for example, distinguish between cash discounts which you receive from domestic vendors and from foreign vendors.

3.2.3

Ledger Integration

Whenever you post a purchase order invoice, it generates financial transactions. These financial transactions include the general ledger and subledgers for accounts payable, sales tax, inventory, and other areas as applicable.

3.2.3.1 Subledger and General Ledger Vendor invoices, credit notes, and payments generate vendor transactions in accounts payable. In parallel to these subledger postings, Dynamics 365 is posting transactions in the general ledger (see section 9.4). Two settings are relevant for the automatic selection of main accounts in the ledger transactions:  Posting setup (see section 9.4.2) – Determines the applicable main accounts in the ledger transactions posted with the product (or service) receipt and the invoice (with reference to the vendor and the item or procurement category).  Vendor posting profiles – Determine the applicable vendor summary account in the ledger transaction posted with the invoice (with reference to the vendor). Both references, the reference to the item and to the vendor, are not only available at the level of individual items and vendors, but also at the group level.

3.2.3.2 Settings for Vendor Transactions Vendor groups (Accounts payable> Vendors> Vendor groups) are a primary setting for vendor transactions. In addition to the ID and the description, you can optionally enter a Default tax group (for the input tax) in the vendor group. When you create a vendor, the default tax group of the vendor group is the default for the sales tax group of the vendor. Vendor posting profiles (Accounts payable> Setup> Vendor posting profiles) control the assignment of vendors to summary accounts. As a prerequisite for the posting of purchase transactions, at least one posting profile has to be specified. In addition, the default posting profile for regular purchase transactions has to be entered in the accounts payable parameters (Accounts payable> Setup> Accounts payable parameters, tab Ledger and sales tax/Posting). The field Summary account on the tab Setup in the posting profile determines the liability account for the assigned vendors. The assignment of summary accounts is available at three different levels as specified in the Account code:  Table – Assigns a summary account to a particular vendor (enter the vendor number in the field Account/Group number).  Group – Assigns a summary account to a vendor group (enter the vendor group in the field Account/Group number).  All – Assigns a general summary account (the field Account/Group number remains empty).

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If there are settings at multiple levels, Dynamics 365 uses the most specific setting. The search for this setting starts with the vendor number, and the level “All” has got the lowest priority.

Figure 3-9:

Setting up a vendor posting profile

If you want to use alternative profile settings for special purposes like prepayment, you can set up additional posting profiles with account assignments which are different from the settings in the default posting profile. In order to use such a posting profile in a transaction, select it in the particular transaction (e.g., in the purchase order detail form on the tab Setup of the header view). For prepayment, the posting profile is specified in the accounts payable parameters.

3.2.4

Case Study Exercises

Exercise 3.1 – Terms of Payment New terms of payment “60 days net” are required in your company. Enter these payment terms in Dynamics 365 with a code P-## (## = your user ID). In addition, a new cash discount D-## for “14 days with 3 percent discount” is required. Be sure to enter the details for the due date and the cash discount date calculation correctly, and select main accounts which correspond to the accounts in existing cash discounts. Exercise 3.2 – Vendor Record A new domestic vendor is accepted. Do not use a template when you create this vendor with a name (starting with your user ID) and a primary address of your

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choice. Select the payment terms and the cash discount of exercise 3.1, and an appropriate vendor group and sales tax group for domestic vendors. Exercise 3.3 – Ledger Integration You want to investigate the ledger integration. Can you tell which summary account applies in ledger transactions which are posted when you post an invoice of the vendor of exercise 3.2?

3.3

Product Management in Purchasing

Purchased items include physical products and intangible goods (e.g., services, fees, licenses). For both types of items, you have to ensure correct and complete master data for the following purposes:  Identification – Clearly describe the item to make sure that the vendor ships the right product.  Internal settings – Multiple settings in the item master data control the way in which the particular item works in Dynamics 365. For inventoried items, required master data include the product and the released product. For intangible goods, you can either – if you want to manage details in master data (e.g., prices) – use a product or – without details – a procurement category. Along with an introduction to the basics of product management, this section primarily contains an explanation of the product data which are necessary for purchasing. In section 7.2 of this book, you can find a general description of product management in Dynamics 365.

3.3.1

Product Categories and Procurement Categories

Product categories group products and services to a hierarchical structure. Depending on the requirements, you can set up multiple hierarchies in parallel and assign every item to a different category in each hierarchy. The hierarchy structure of product categories can be simple or contain multiple levels. Depending on the hierarchy type, a particular category hierarchy is only used in procurement, or also in sales or other areas. You can use product categories independently of items. When you purchase a service or an intangible item, which is not tracked in inventory, simply enter a product category (instead of an item number) in the purchase order line in this case.

3.3.1.1 Category Hierarchies and Product Categories You can view all product category hierarchies in the list page Product information management> Setup> Categories and attributes> Category hierarchies. In order to view the structure of a particular hierarchy, open the category hierarchy detail form

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with a click on the link in the field Name. If you want to edit the structure, click the button Edit next. In order to add a new category or a new category folder, select the parent node in the tree structure on the left and click the button New category node in the action pane. In the new category, enter at least the Name, the Code, and the Friendly name. If you want to set up a completely new category hierarchy, click the button New in the category hierarchy list page. In the Create dialog that is shown next, enter a name and a description for the hierarchy before you click the button Create. Dynamics 365 then shows the category hierarchy detail form, in which you can enter the categories of the new hierarchy.

Figure 3-10:

Editing a product category in the category hierarchy detail form

The purpose of a hierarchy is specified by the hierarchy role. Available roles include the “Procurement category hierarchy” for purchasing and the “Sales category hierarchy” for sales. In order to assign a category hierarchy to a hierarchy role, open the menu item Product information management> Setup> Categories and attributes> Category hierarchy role associations. In the role association form that is shown next, you can enter or review lines with the Category hierarchy type (the hierarchy role) and the assigned Category hierarchy. You can select the same hierarchy in multiple lines. The purchasing-related data of a procurement category (a category in a hierarchy with the role “Procurement category hierarchy”) are specified in the Procurement categories form as described further down in this section.

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3.3.1.2 Procurement Categories Procurement categories are product categories which belong to the hierarchy with the type “Procurement category hierarchy”. You can select a procurement category instead of a product number in the lines of purchase transactions (purchase orders, purchase requisitions, purchase agreements). The procurement category form (Procurement and sourcing> Procurement categories), which shows the purchasing-related settings of these categories, includes the item sales tax group on the tab Item sales tax groups as a core setting. As a prerequisite for the use of procurement categories in purchase transactions, the posting setup (see section 9.4.2) has to include settings for categories (Cost management> Ledger integration policies setup> Posting, tab Purchase order, option Purchase expenditure for expense).

3.3.2

Basic Product Data

In order to support multi-company enterprises, the structure of product data in Dynamics 365 has got two levels:  Products (“Shared products”) – Include the common data in all companies.  Released products (“Items”) – Include the company-specific data. Shared products are a mandatory element in the data structure. But in a small enterprise with only one company, it is possible to manage the products directly in the released product form. If you create a product in the released product form, Dynamics 365 automatically generates a related shared product in parallel.

3.3.2.1 Shared Products The aim of the shared products in Dynamics 365 is to establish a common table with all products in all companies. Apart from the product number and the name/description, shared products do not contain extensive information. In the menu item Product information management> Products> All products and product masters, you can view all items at the enterprise level – including regular products, configurable products, and service items. If you want to create a new product, click the button New and enter following data in the Create product dialog:  Product type – “Item” for stocked products, “Service” for services.  Product subtype – “Product” for regular items, “Product master” for items with variants (see section 7.2.1).  Product number – Enter manually, if there is no automatic number from the number sequence.  Product name – Short description in system language.  Search name – Internal text for searching the item.  Retail category – Product categorization in the Dynamics 365 module “Retail”.  Catch weight – Usually “No”, for catch weight items “Yes” (see section 7.2.1).

3.3 Product Management in Purchasing

Figure 3-11:

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Selecting an item in the list page All products and product masters

For a regular item that is stored in inventory, select the Product type “Item” and the Product subtype “Product”. For an intangible item or a service, select the Product type “Service”. Alternatively, you can select the Product type “Item” for an intangible item in case the item is assigned to an item model group for noninventoried products (see section 7.2.1). Once close the Create dialog with the button OK, Dynamics 365 creates a shared product and shows the shared product detail form. In the detail form, you can enter further optional settings. Apart from the fields Product name and Description in the detail form, which both are to be entered in the system language (default language specified in the system parameters), there is a separate form for item descriptions in foreign languages (access with the button PRODUCT/Languages/Translations in the action pane). In order to assign the inventory dimensions that you want to use for the product, click the button PRODUCT/Set up/Dimension groups in the shared product. The inventory dimensions are divided into three groups:  Product dimension group – Only for the product subtype “Product master”. Specifies whether the item has different configurations, sizes, colors, or styles.  Storage dimension group – Specifies whether the item inventory is tracked at the level of sites, warehouses, locations, inventory status, or license plates.  Tracking dimension group – Specifies whether batch or serial numbers are used. The dimension “Owner” refers to vendor consignment (see section 7.4.8). The button PRODUCT/Set up/Product categories in the shared product provides access to the category assignment form, in which you can link the product to

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categories. Product categories, which are optional, provide the option to manage hierarchical product structures (widely used in the module “Retail”). In the shared product, you can leave the dimension groups blank. Dimension groups, which are not entered in the shared product, have to be entered in the related released product(s) at the company level. Specify dimension groups at the company level (in the released product) if there are different dimension settings per company (e.g., if only one company in the enterprise uses locations).

3.3.2.2 Releasing a Product Before you can register a transaction for a new shared product, you have to release it with the button Release products in the action pane of the shared product page (a multi-select of products is possible). The selected product(s) are shown in the Release products wizard next. Switch to the Select companies page of the wizard next and put a checkmark in front of all applicable companies. Then confirm the selection with the button Finish on the last page. If applicable (e.g., in a single-company implementation), you can skip creating a shared product and immediately create a new product in the released product form. If you create a product with the button New in the released product form, the released product and the shared product are created in parallel.

3.3.2.3 Managing Released Products The released product (Product information management> Products> Released products), also called “Item” in some areas of Dynamics 365, contains the item details. Apart from the menu item, the workspace Released product maintenance also provides access to the released product form. In the shared product form, you can directly access the related released product with the link in the field Item number on the right of the FactBox Released to companies (select the line with the appropriate company) and the link in the field Item number of the Product information dialog which is shown next. After releasing a new product, you have to populate the following mandatory fields in the released product form:  Item group (tab Manage costs) – Determines the main accounts for ledger integration.  Item model group (tab General) – Determines item handling and inventory valuation.  Dimension groups (button PRODUCT/Set up/Dimension groups) – Required if not specified in the shared product.  Unit of measure – For purchasing, sales, and inventory. The default for the inventory unit of measure (field Unit on the tab Manage inventory in the released product form) of new items is specified in the inventory parameters (Inventory management> Setup> Inventory and warehouse management

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parameters, field Unit on the tab General). Provided that there is an applicable unit conversion, you can enter different units for sales (on the tab Sell) and purchasing (on the tab Purchase).

Figure 3-12:

Viewing the tab Purchase in the released order detail form

In addition, you should enter the Item sales tax group on the tab Sell and on the tab Purchase (mandatory, if the slider Mandatory item sales tax group on the tab General in the inventory parameters is set to “Yes”). A default value for the item sales tax group is specified on the tab Setup in the item group. In the field Price on the tab Manage costs, you can enter a base cost price for the item. If the item applies a standard cost valuation (according to selected item model group), click the button MANAGE COSTS/Set up/Item price in the action pane and enter/activate a cost price per site as described in section 7.3.3.

3.3.2.4 Purchasing Related Data and Default Order Settings The tab Purchase in the released product form contains core purchasing data, including the item sales tax group already mentioned. The Buyer group provides the option to specify the purchasing responsibility for the item. The lookup field Approved vendor check method, initialized with a default value from the corresponding field in the item model group, controls if you can purchase the item only from approved vendors. If you decide to use approved vendors for the item

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(with the option “Warning only” or “Not allowed”), enter allowed vendors with the button PURCHASE/Approved vendor/Setup in the action pane. Essential order-related settings of a released product are specified in the default order settings, which you can access with the button MANAGE INVENTORY/Order settings/Default order settings in the released product form. In the default order settings, the record with a blank Site and the Rank “0” determines the default order settings at the company level. The Default order type, which is only available at the company level, controls the way to supply the item. The default order type “Purchase order” determines that the item is purchased externally, whereas the default order type “Production” (for discrete manufacturing and process manufacturing) and “Kanban” (for lean manufacturing) specify internal production. You can override the default order type with settings in the item coverage. The tab Purchase order in the default order settings contains the purchasing-related settings – including default values for lot size (field Multiple) and order quantity (field Standard order quantity). A checkmark in the checkbox Stopped on this tab blocks the item for purchase transactions. If you want to specify order settings at the level of sites (for subsidiaries, see section 10.1.6), insert an additional record in the default order setting with the Site in the respective field. The field Rank, which determines the search priority within the default order settings, is automatically populated with the next number. In order to override the default order settings at the company level with settings at the level of sites, set the applicable slider Override default settings in the site-specific order settings to “Yes”. If the item is a product master (product with variants, see section 7.2.1), you can also enter default order setting at variant level. When you enter an order (e.g., a purchase order), the default order settings initialize various fields in the order line (e.g., the order quantity). You can override the default values in the order line afterward.

3.3.2.5 Item Coverage The primary setting for the item supply is the Default order type in the default order settings. On the tab Purchase of the released product detail form, the field Vendor determines the main vendor for the item. Coverage groups contain settings for requirements planning (see section 6.3.3). A general default for the applicable coverage group is specified in the master planning parameters (Master planning> Setup> Master planning parameters, field General coverage group on the tab General). You can override this default group with a specific coverage group for the selected item on the tab Plan of the released product detail form.

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The item coverage form, which you can access with the button PLAN/Coverage/Item coverage in the released product form, contains further coverage settings for the item – including a minimum and a maximum quantity. In addition, you can specify a Planned order type (set the slider Change planned order type to “Yes” to override the default order type specified in the default order settings) and a Vendor account (overriding the main vendor specified in the released product form) in the item coverage. Depending on the dimension group settings, coverage settings have to be specified at the level of inventory dimensions (e.g., per warehouse).

3.3.2.6 New in Dynamics 365 Compared to Dynamics AX 7, the default order settings and the site-specific order settings are merged into one common form.

3.3.3

Purchase Price Setup

There is no difference in the base functionality for pricing in purchasing and in sales. Pricing includes a multi-stage calculation of prices and discounts, which starts with the base price in the released product form and continues with trade agreements at the level of vendor groups and individual vendors. Since many companies use the discount calculation in sales to a larger extent than in purchasing, the section below only covers the price calculation. You can find details on the discount calculation in section 4.3.2. Apart from discounts which are deducted immediately, there is the option to manage vendor rebate contracts with a retrospective discount depending on the purchasing volume in a given period (see section 4.9.4).

3.3.3.1 Base Purchase Price The base purchase price is specified in the field Price on the tab Purchase of the released product form. This price is the price per purchase unit (field Unit on the tab Purchase). The Price quantity determines the quantity which is the basis for this price. A price quantity “100”, for example, characterizes a price for hundred units (e.g., for screws). If you want to record different base purchase prices per site (subsidiary), click the button MANAGE COSTS/Set up/Item price in the released product. In the item price form, you can enter and activate a price per site as described in section 7.3.3 (use the Price type “Purchase price”). The base purchase price is used in purchase orders if there is no applicable trade agreement for the particular vendor and item. Since prices (and price charges) in the released product form are shown in the currency of the current company, there is a conversion of the base purchase price to the currency of the purchase order if the order is in a foreign currency.

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3.3.3.2 Automatic Price Update If the slider Latest purchase price on the tab Purchase of the released product is set to “Yes”, the base purchase price in the released product is updated with the invoiced price whenever you post a purchase order invoice for the item. In addition to the field Price on the tab Purchase of the released product, which is updated with the latest purchase price (and which is the default for the next order if no other price is applicable), the item price form (access with the button MANAGE COSTS/Set up/Item price in the released product) also shows this price update. If you want to track the history of price updates, activate the price history (inventory parameters, slider Last price history on the tab Inventory accounting). If the price history is activated, price updates do not update existing item prices in the item price form but insert new item price records.

3.3.3.3 Price Charges In order to record charges (like fees and freight), which are added to the base price, you can optionally enter Price charges on the tab Purchase of the released product. If the slider Incl. in unit price is set to “No”, the amount entered in the field Price charges is added to the total of an order line, irrespective of the quantity. In an example for this setting, a purchase order line with 10 units of an item with a Price of USD 3.00 and Price charges of USD 1.00 shows a unit price of USD 3.00 and a line amount of USD 31.00. The price charges are not shown in a separate field on printed purchasing documents. If the slider Incl. in unit price is set to “Yes”, Dynamics 365 adds the price charges to the unit price. In this case, the field Charges quantity determines the quantity basis for allocating the price charges to the unit price. In an example for this setting, a purchase order line with 10 units of an item with a Price of USD 3.00, a Charges quantity of 0.00 (or 1.00), and Price charges of USD 1.00 shows a unit price of USD 4.00 and a line amount of USD 40.00. Apart from the general price charges in the released product form, there are sitespecific price charges in the item price form (access with the button MANAGE COSTS/Set up/Item price in the released product). In the context of charges, do not confuse the price charges in the released product with charges codes and charges transactions, which are managed separately in orders. You can find more details on charges management in section 4.4.5.

3.3.3.4 Trade Agreements for Purchase Prices You can use trade agreements to enter more detailed settings for prices and discounts. If you want to view the trade agreements with the purchase prices of a product, click the button PURCHASE/View/Purchase prices in the released product form. Trade agreements include following levels:

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 Period of validity – From date / To date, related to order entry or delivery date (controlled by the Date type on the tab Prices in the procurement parameters).  Quantity – Columns From and To (for quantity-dependent prices).  Unit of measure – Column Unit.  Currency – Currency of the price.  Vendor specification – Columns Party code type and Account selection (Individual vendor, vendor group, or all vendors). In addition to the detail levels mentioned above, inventory dimensions are also a possible specification level for trade agreements. You need to use inventory dimensions in trade agreements if there are different prices per site, or per warehouse, or related to product dimensions like size or color. In order to control the dimension columns which are displayed in the purchase price form, click the button Inventory/Display dimensions in this form. As a prerequisite for the use of dimensions in pricing, the dimension group of the particular item has to include the selected dimensions in the price search (see section 7.2.2). The price search runs from the most specific to the most general agreement, in other words from vendor prices to vendor group prices to general prices. If the checkbox Find next in the rightmost column of the trade agreements is selected, Dynamics 365 searches for the lowest price in trade agreements – a lower group price overrides a higher vendor-specific price in this case. You can stop this search by clearing the checkbox Find next (set the slider Find next to “No” when entering the respective trade agreement journal line).

3.3.3.5 Registering New Trade Agreements If you want to set up a new purchase price agreement, enter and post a trade agreement journal. In order to access the trade agreement journals, open the menu item Procurement and sourcing> Prices and discounts> Trade agreement journals or click the button PURCHASE/Trade agreements/Create trade agreements in the released product form. A trade agreement journal consists of a header and at least one line. The lookup field Show in the upper pane of the trade agreement journal list page provides the option to select whether to view only open journals or to include posted journals. In order to create a new journal, click the button New in the action pane and select a journal name. From the journal name setup, the content of the field Relation – e.g., “Price (purch.)” – is used as default value for the Relation in the journal header, which, in turn, is used as default value for the journal lines. In the journal header, click the button Lines to access the journal line form with the trade agreement lines. In a journal line for a purchase price agreement, make sure that the option “Price (purch.)” is selected in the column Relation. The Party code type determines if the price refers to a specific vendor (“Table”), a vendor price group (“Group”), or all vendors. Depending on this selection, the vendor or the

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vendor price group has to be entered in the column Account selection. In the column Product code type, you can only accept the option “Table” in a price agreement line. Then enter the product number in the field Item relation.

Figure 3-13:

Registering purchase prices in the trade agreement journal lines

Apart from the fields in the grid on the tab Overview of the journal lines, there are additional data the tab Details. These data include the From date, the To date, the Price unit (refers to the Unit in the journal line, equivalent to the Price quantity in the released product form), and the Lead time. When you enter an order line, the price, price unit, and lead time of the applicable trade agreement override the default values from the released product. A message bar at the top of the form indicates the applicable inventory dimensions for pricing, which are not entered. In Figure 3-13, the instructions tell that price agreements for the selected item can be entered at the level of site and warehouse. You can hide and show the inventory dimension columns in the journal lines with the button Inventory/Display dimensions in the toolbar of the tab Overview. Once you have entered the journal lines, click the button Post in the action pane to activate the agreement.

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3.3.3.6 Updating or Deleting Trade Agreements In order to record a new price for an item, enter and post a trade agreement with the new price, the from-date, and the to-date. If you want to edit (e.g., update the to-date of the old agreement) or delete an active agreement, open the trade agreement inquiry – for example with the button PURCHASE/View/Purchase prices or the button PURCHASE/Trade agreement/View trade agreements in the released product. Select one or more trade agreement lines and click the button Edit selected lines in the action pane next. In the confirmation dialog that is shown next, select a journal name for the new journal (used for the update) and click the button OK. The new trade agreement journal contains one line per original trade agreement line. This new line is connected to the original trade agreement. Edit the data in the line(s) according to your requirements before you click the button Post to update the agreement. If you want to delete the agreement instead of updating it, click the button Select all agreements to be deleted in the toolbar of the tab Overview in the new trade agreement journal and post the journal.

3.3.3.7 Required Setup for Pricing As a prerequisite for trade agreements, you have to set up at least one trade agreement journal name (Procurement and sourcing> Setup> Prices and discounts> Trade agreement journal names). The field Relation in a journal name determines the default value for the column Relation in the agreement journals. The price engine only uses a trade agreement, if the related combination of levels is activated in the price/discount activation (Procurement and sourcing> Setup> Prices and discounts> Activate price/discount). If you want to enter prices at the group level, you have to set up the required vendor price groups (Procurement and sourcing> Prices and discounts> Price/discount groups> Vendor price/discount groups, Show “Price group”). In order to assign a group to a vendor, select the appropriate price group on the tab Purchase order defaults in the vendor detail form. In purchase orders, the price group of the vendor is the default value, but you can override the price group on the tab Price and discount in the header view of the purchase order detail form.

3.3.3.8 New in Dynamics 365 Compared to Dynamics AX 7, there are changes of the field labels in the released product form (the former Price unit is now called Price quantity, the former field Price quantity is now called Charges quantity and moved to the field group Charges).

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3 Purchase Management

Case Study Exercises

Exercise 3.4 – Procurement Categories Your company wants to purchase a new kind of services, for which you have to set up appropriate product categories in the procurement category hierarchy. Enter a new category node “##-services” with the categories “##-assembling” and “##-fees” (## = your user ID). The procurement categories refer to the standard tax rate. Exercise 3.5 – Product Record In order to process purchase orders in the following exercises, you want to set up a new product. Create a shared product with the product number I-## and the name “##-merchandise” (## = your user ID). It is a stocked product with inventory control at the level of site and warehouse. Variants and serial/batch numbers are not required. Select the appropriate dimension groups in the shared product. Then release the product to your test company. In the released product, select an appropriate item group for merchandise and an item model group with FIFOvaluation. The item does not require approved vendors. The item sales tax group for sales and for purchasing should refer to the standard tax rate. The unit of measurement for the item is “Pieces” in all areas, and the main vendor is the vendor of exercise 3.2. The base purchase price and the base cost price is USD 50, and the base sales price is USD 100. Enter default quantities (Multiple 20, Min. order quantity 40, Standard order quantity 100) and select the main site and the main warehouse for purchasing and sales in the default order settings. Note: If the number sequence for product numbers is set up for automatic numbering, you don’t have to enter a product number. Exercise 3.6 – Trade Agreement You agree to a lower price for the new item with the vendor of exercise 3.2. Enter a trade agreement for this vendor with a purchase price of USD 45 for the item of exercise 3.5. There is no minimum quantity and no end date for this price.

3.4

Purchase Order Management

An order is a definite promise to supply/accept goods or services on agreed terms. For this reason, purchase orders have to include at least following details: Vendor (name, address), commercial terms (currency, payment terms, terms of delivery), product (identification, quantity, unit of measure), price (price, discount), delivery date, and delivery address.

3.4.1

Basics of Purchase Order Processing

Apart from manually entering a new purchase order, there are the following options to generate an order automatically:

3.4 Purchase Order Management         

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Master planning – Generate an order from a planned order, see section 6.3.4. Purchase requisition – Generate an order from a requisition, see section 3.8.2. Request for quotation – Generate an order from a quote, see section 3.8.3. Purchase agreement – Generate an order as a release order, see section 3.8.1. Direct delivery – Generate an order from a sales order, see section 4.8. Subcontracting – Generate an order from a production order, see section 5.7.2. Inventory ownership change – For consignment inventory, see section 7.4.8. Project accounting – Generate an order from an item task in the project module. Purchase journal – Generate an order from an order with the type “Journal”.

Planned purchase orders are a result of master planning. You can create an actual purchase order by firming the planned purchase order then. Depending on the master planning setup (firming time fence), master planning may skip planned orders and immediately create purchase orders. Purchase requisitions are internal documents which request purchasing an item. They have to be entered or initiated by the person who wants the item (e.g., for items like office supplies). Requests for quotation are required if you want to obtain and compare quotes from multiple vendors. You can create a request for quotation either automatically from a purchase requisition or a planned order, or enter it manually. Purchase order processing related to projects is part of the project module, described in the relevant online help and training documentation. Other ways for creating purchase orders in Dynamics 365 are automatic transfers with an import from external applications or the intercompany functionality (purchasing from affiliated companies within a common Dynamics 365 database).

Figure 3-14:

Purchase order processing in Dynamics 365

After creating and, if required, approving a purchase order, you can process the order from the start to the end as shown in Figure 3-14. Depending on the setup,

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the purchase order confirmation and vendor invoice posting are the only mandatory steps in order processing.

3.4.1.1 Approving and Confirming Purchase Orders In a purchase order which is subject to change management, you have to submit the order for approval. Depending on the order and the approval workflow, there is an automatic or a manual approval. If change management does not apply, the approval status of the order is immediately “Approved”. Once the order is approved, you can optionally post a purchase inquiry as a basis for an order review by the vendor. The next mandatory step in order processing is the order confirmation, which usually includes sending a hardcopy or electronic order document to the vendor.

3.4.1.2 Receipts List and Inventory Registration If your warehouse requires a list of purchased items for information purposes and for preparing the item arrival, you can print a receipts list. Unlike the receipts list, inventory registration as the next step updates the on-hand quantity in inventory. The inventory registration, which includes all required inventory dimensions (depending on the item, this includes the warehouse, serial number, or batch number), is an optional step before posting the product receipt. Depending on the business processes in the warehouse, there are following alternative options for the inventory registration:  Registration form – Inventory registration in the purchase order line.  Item arrival journal – Inventory registration with a journal in inventory.  Mobile device transactions – In the advanced warehouse management. If the checkbox Registration requirements is selected in the item model group of the purchased item, inventory registration is not optional, but a mandatory step before posting the product receipt.

3.4.1.3 Product Receipts With the product receipt, inventory transactions and – depending on the setup – general ledger transaction are posted. You can post the product receipt either in the purchase order, or in the appropriate menu item in the procurement module, or in the posted item arrival journal (inventory module).

3.4.1.4 Vendor Invoices Once you receive the vendor invoice, you can enter it in the purchase order form or the pending vendor invoice form. Depending on the setup, it is not possible to post the invoice before obtaining approval in a workflow. An alternative way for vendor invoice processing is to enter and post it in an invoice register and a subsequent invoice approval journal (see section 9.3.2).

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3.4.1.5 Physical and Financial Transactions Inventory transactions include two different types (steps): Physical transactions and financial transactions. Generally speaking, physical transactions are packing slips (product receipts), and financial transactions are invoices. You have to distinguish these transactions, particularly with regard to inventory valuation and ledger posting. You can find more details on this in section 7.2.4 of the book.

3.4.2

Purchase Order Registration

Like all documents, purchase orders consist of a header and one or more lines. The header contains the common data of the order, including the order number, vendor, language, currency, and payment terms.

Figure 3-15:

Structure of purchase orders

Other fields in the order header (e.g., the delivery date) are a default value for the order lines – you can override them at line level. If you modify header data after creating order lines, procurement parameter settings (Procurement and sourcing> Setup> Procurement and sourcing parameters, button Update order lines in the toolbar of the tab General/Default values and parameters) control whether the existing order lines are updated automatically. The default value for the Purchase type in the purchase order header is specified on the tab General in the procurement parameters (usually “Purchase order” for regular purchase orders). There are the following options for the purchase type in a purchase order:  Purchase order – Regular purchase order.  Journal – Draft or template, with no impact on inventory or finance.  Returned order – Credit note, see section 3.7. Order lines include the item number (or procurement category), description, quantity, price, discount, delivery date, and other data as applicable. When ordering a stocked product, you have to select the item number of the released product. For non-inventoried items (e.g., services), you can enter the item number of an intangible item, or skip the item number and select a procurement category.

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When you create a purchase order header or line, Dynamics 365 initializes numerous fields with default values from the vendor in the header and the item in the line. Depending on your permissions, you can subsequently update the content of the fields in the purchase order. If you agree, for example, to specific payment terms in a particular purchase order, change the terms of payment in the order header. If the new payment terms apply to all future orders, you should also change the terms of payment in the vendor record to receive the right default value when entering the next order for this vendor.

3.4.2.1 Entering a Purchase Order Depending on your personal preferences, you can start from one of the following forms to create or update a purchase order manually:  Vendor form – Preferable, if you want to start with the vendor search.  Purchase order form – Preferable, if you want to edit an existing order (e.g., if you look for all orders that are not yet approved).  Purchase order preparation workspace – Several filtered lists with orders. In the vendor form (Procurement and sourcing> Vendors> All vendors), you can immediately create an order with the button PROCUREMENT/New/Purchase order. Dynamics 365 creates a purchase order header with default data from the selected vendor and switches to the lines view of the purchase order detail form, in which you can enter the first order line immediately. If you want to access the current orders of a vendor from the vendor list page, click the button PROCUREMENT/ Related information/Purchase orders/All purchase orders. Dynamics 365 shows the purchase order list page filtered on the selected vendor then. The center pane in the workspace Purchase order preparation, which you can access from the dashboard or the folder Workspaces in the Procurement and sourcing menu, includes several lists with purchase orders grouped by approval status. Click on a purchase order number shown as a link in the grid if you want to open the related purchase order detail form. You can create a new order from the workspace with the button New purchase order in the action pane. The following steps are the same as if you create an order from the purchase order list page. The purchase order list page (Procurement and sourcing> Purchase orders> All purchase orders) shows a list of all purchase orders. In order to view the details of a purchase order, click the link in the field Purchase order with the respective order in the list page. If you want to enter a new purchase order in the purchase order list page, press the shortcut key Alt+N or click the button New in the action pane. In the Create purchase order dialog, select the vendor in the field Vendor account first. You can search the vendor by typing the first characters of the vendor number (or the name), or by explicitly opening the lookup in which you can use a grid filter (e.g., for a filter on the column Name of the lookup).

3.4 Purchase Order Management

Figure 3-16:

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Creating a new order in the purchase order list page

Once you select a vendor, the Create dialog retrieves various default values from the vendor record. You can expand the tabs General and Administration in the dialog to access additional fields of the new order header. If you want to change data like the vendor number, purchase type, or currency, you can update the particular field in the dialog or – after closing the dialog – in the header view of the purchase order detail form. Once you close the dialog with the button OK, Dynamics 365 creates the order header and switches to the purchase order detail form in the lines view.

3.4.2.2 Purchase Order Lines In order to create an order line in the lines view of the purchase order detail form, click the button Add line in the toolbar of the tab Purchase order lines or simply click the first line in the lines pane and select an Item number (released product) or a Procurement category. Data in the released product initialize numerous fields in the order line – for example, the quantity, unit, unit price, site, or warehouse. If site and warehouse are specified in the order header, they take priority over the default values from the item. Trade agreements can override the unit price specified directly in the released product form. They can also provide a default for the discount fields (see section 4.3.2). The calculation of the net amount in a line is based on quantity, unit price,

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and discounts. You can update the amount in the field Net amount manually – Dynamics 365 shows an empty unit price and discount in this case.

Figure 3-17:

Updating the delivery date in a purchase order line

The Line number is automatically populated when you save the order line. The default for line numbers derives from the Increment specified in the system parameters (System administration> Setup> System parameters). If you want to view additional line data (e.g., the delivery date), expand the tab Line details and switch to the appropriate sub-tab. The delivery date on the sub-tab Delivery in the line details receives its default value from the purchase order header if this date is after the lead time of the item. Otherwise, the default for the delivery date of the line is the lead time added to the session date. The lead time of the item is specified in the default order settings of the item, or in the purchase price trade agreement, or in the item coverage form.

3.4.2.3 Inventory Transactions When you enter a line with an inventoried product in a regular purchase order, Dynamics 365 creates a corresponding inventory transaction. You can view this transaction with the button Inventory/Transactions in the toolbar of the order line. The receipt status of the transaction is “Ordered” (or, for lines with a negative quantity, the issue status is “On order”), and the fields Physical date and Financial date are empty. In the course of purchase order processing, the product receipt and the vendor invoice update this inventory transaction (see section 7.2.4).

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3.4.2.4 Intangible Items and Procurement Categories If you want to order an intangible item (e.g., a particular service), select the item number of a non-inventoried product (item with product type “Service” and/or linked to an item model group for non-stocked items, see section 7.2.1) and enter the order line in the same way as a line with a regular inventoried item. Alternatively, you can skip the item number field in the order line and select a procurement category. The procurement category form does not include as many details as the item record. For this reason, you have to enter many details in the order line manually – for example, the quantity, unit, unit price, and line text (on the sub-tab General).

3.4.2.5 Delivery Addresses You can specify the delivery address for a purchase order on the tab Address in the purchase order header view. The default for this address is the delivery address of the current company, specified on the tab Addresses in the legal entity form (Organization administration> Organizations> Legal entities). If a delivery address is specified for the site or the warehouse in the order header, this address takes priority. There are two options to change the delivery address in a purchase order:  Select an existing address – If already included in the global address book.  Insert a new address – If the address is completely new. In the field Delivery address on the tab Address in the purchase order header, you can select an address of the current company, the site, or the warehouse. If you want to select another address in the global address book (e.g., a customer address), click the button on the right of the field Delivery address. The Address selection dialog then provides the option to select an address from the global address book. If you want to specify a completely new address, click the button on the right of the field Delivery address. In the New address dialog that is shown next, enter the delivery address (similar to a vendor address, see section 3.2.1) and set the slider One-time to “Yes”. If you need separate delivery addresses at the line level, open the sub-tab Address on the tab Line details in the purchase order lines. In the lines, you can select existing addresses or create new addresses (like in the header). Note: If the slider One-time in the New address dialog is set to “No” and you select the option “Delivery” in the field Purpose when creating a new address, the address is the new main receipt address of the current company.

3.4.2.6 Charges and Input Tax If an order includes additional costs like freight or insurance, you can use charges at order header level or at line level. The functionality of charges in purchasing corresponds to charges in sales (see section 4.4.5). In order to access the charges

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that refer to an order header, click the button PURCHASE/Charges/Maintain charges in the action pane of the purchase order. In order to access the line charges, select the respective order line and click the button Financials/Maintain charges in the toolbar of the tab Purchase order lines. The applicable input tax (Sales tax/VAT) is depending on the vendor and the item:  Sales tax group – The vendor record contains the Sales tax group (VAT group) which in most cases distinguishes domestic and foreign vendors. For companies within the European Union, “EU vendors” usually is another category.  Item sales tax group – The item record contains the Item sales tax group (item VAT group) which distinguishes items at a regular tax rate and other items, which are subject to a reduced rate (for example food in many countries). Purchase order header and lines retrieve the tax groups from the vendor and the item. Based on these groups and related settings, the applicable tax is calculated automatically. You can edit the Sales tax group on the tab Setup in the header view. From the header, the sales tax group is copied to the lines. In the lines, you can edit the Sales tax group and the Item sales tax group on the sub-tab Setup of the tab Line details. If you want to view the calculated sales tax, click the button PURCHASE/ Tax/Sales tax in the purchase order form.

3.4.2.7 Delivery Schedule In a purchase order with an item, which you want to receive in multiple deliveries, you have to enter multiple lines with the same item but different delivery dates. In order to enter and manage order lines with common commercial conditions (price, discounts) but multiple deliveries in an easy way, you can use the delivery schedule functionality. Entering a delivery schedule starts by inserting a regular order line with the total quantity of all deliveries. Then click the button Purchase order line/Delivery schedule in the toolbar of the order lines. In the Delivery schedule dialog, enter the lines for the individual deliveries with quantity and delivery date. Once you close the dialog with the button OK, Dynamics 365 creates additional purchase order lines for the deliveries. Only these delivery lines are included in product receipt/invoice posting and in the calculation of the item availability. The original order line can be used to manage a common price and discount for the delivery lines. The column Type in the purchase order lines indicated whether an order line is the total quantity line or a delivery line.

3.4.2.8 Header View and Lines View When you access the purchase order detail form, it is shown in the lines view. At the top of the page, a header line below the action pane displays the order number and the vendor on the left, and the order status and the approval status on the

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right. After expanding the tab Purchase order header in the lines view, it shows selected header fields (e.g., the delivery date). If you want to access the complete header, click the button Header (below the action pane) in the detail form or press the shortcut key Ctrl+Shift+H. In order to switch from the header view back to the lines view, click the button Lines or press Ctrl+Shift+L.

3.4.2.9 Copying a Purchase Order If you need to enter a purchase order which is similar to an existing order, you can copy the existing order. This order can be assigned to a different purchase type. You can, for example, copy an order with the type “Journal” into a regular purchase order.

Figure 3-18:

Selecting orders and order lines in the Copy from other documents dialog

In order to copy a purchase order into a new order, create a new order header into which you want to copy. In the new order, click the button PURCHASE ORDER/ Copy/From all in the action pane. The Copy from other document dialog, which is shown next, displays a list of orders on the tab Purchase orders, and of other documents on the lower tabs. Select the checkbox in the left-most column as shown in Figure 3-18 to mark the records which you want to copy – entire orders in the sub-tab Headers, or individual order lines in the sub-tab Lines.

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When you copy an order, be aware of the slider Delete purchase lines on the tab Parameters. If this slider is set to “Yes”, all lines of the new order are deleted before the copied lines are inserted. This does not matter for a new order, but it might be unintended if you only want to copy additional lines to an existing order. Once you have selected the order headers and the lines (lines can refer to different headers), click the button OK to close the Copy dialog. Dynamics 365 copies the selected lines, depending on the slider Copy order header including header data like the payment terms (if you want to copy header data, select one header). In addition to the Copy from all button, there is another button for copying in the purchase order form – the button PURCHASE ORDER/Copy/From journal. You can use this button if there is a purchase order with posted documents (e.g., vendor invoices) and you want to transfer the posted lines into the order again. In addition to the copy buttons in the action pane, the copy features are also available in the button Purchase order line of the toolbar in the order lines.

3.4.2.10 Purchase Journal Orders Purchase orders with the type “Journal” are used as draft or template. It is not possible to post a document (e.g., order confirmation or product receipt) in orders with this purchase type, and the order lines do not generate inventory transactions. Apart from copying a purchase journal to a regular purchase order, you can transfer a journal to a purchase order by simply changing the purchase type in the order header, or with the periodic activity Procurement and sourcing> Purchase orders> Purchase journal> Post purchase journal.

3.4.3

Change Management and Purchase Order Approval

Depending on the setup for change management, a purchase order has to be approved in an approval workflow after creating the order.

3.4.3.1 Change Management Settings The procurement parameters (Procurement and sourcing> Setup> Procurement and sourcing parameters) contain the primary setting for purchase order change management: The slider Activate change management on the tab General controls whether the approval workflow is activated for all purchase orders. If the slider Allow override of settings per vendor in the procurement parameters is set to “Yes”, you can enter divergent settings for particular vendors. In the vendor detail form, you can set the slider Override settings in the field group Change management for purchase orders on the tab Purchase order defaults to “Yes” if you want to override the general setting in either direction: Activate change management only for specific vendors (while approval is not required in general), or the other way around. The purchase order approval process is based on the workflow system (see section 10.4). In order to set up the required workflows, open the menu item Procurement

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and Sourcing> Setup> Procurement and sourcing workflows. Purchase order workflows refer to the workflow type “Purchase order workflow” and “Purchase order line workflow”.

3.4.3.2 Approval Status The purchase order header contains the Approval status, which is displayed in a separate column on the purchase order list page. Depending on the approval workflow, a purchase order has got the following approval status:      

Draft – Initial approval status, before submitting for approval. In review – After submitting, while the order is waiting for approval. Rejected – After the reviewer rejects approval (resubmit or recall in this case). Approved – After approval (the next step is the order confirmation). In external review – After posting the purchase inquiry (optional step). Confirmed – After posting the purchase order confirmation.

In addition, there is the approval status “Finalized”. This status, which you can set with the button PURCHASE/Actions/Finalize in the purchase order, is only available after posting the invoice. Finalizing is an optional last step in order processing to block the order for any changes. It is only necessary when working with budget control and encumbrances. If change management is not activated for a purchase order, the approval status of the order immediately is “Approved”, and you can continue order processing and confirm the order.

3.4.3.3 Approval Workflow for Purchase Orders In a purchase order with activated change management, the button Workflow is shown in the action pane, and the initial approval status of the order is “Draft”. Click the button Workflow/Submit to submit the order for approval after entering the order in this case. Approval is also required after modifying an order which has been approved already. After submitting for approval, the approval status switches to “In review” and the workflow system starts processing the approval workflow in a batch process. Because of this batch process, it is not possible to post the order confirmation for a purchase order immediately if change management is active. Even if a workflow with automatic approval applies, you have to wait until the workflow system has finished the batch process. If a manual approval is required, the responsible person has to decide whether to approve the purchase order. The work items assigned to this person (see section 10.4.3) are the usual starting point for manual approvals.

3.4.3.4 Request Changes If you want to edit a purchase order after approval, click the button PURCHASE ORDER/Maintain/Request change in the purchase order. Once you have finished the changes on the purchase order, you have to submit the order for approval again.

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When deciding on the approval of a modified order, the responsible person can click the button MANAGE/History/Compare to recent versions to compare the current purchase order with the last confirmed version. If you want to compare all precedent versions, click the button MANAGE/History/View purchase order versions.

3.4.4

Canceling and Deleting Purchase Orders

There is a difference between canceling and deleting a purchase order: Whereas canceling removes the open quantity (the expected quantity for future product receipts), deleting eliminates the order line or the entire order. Deleting an order is not possible after posting the order confirmation, or, if change management applies, after approval. But you can always cancel the order.

3.4.4.1 Canceling an Order or Order Line You should cancel a purchase order line if you do not expect any further deliveries for the line. For this purpose, select the respective order line and click the button Update line/Deliver remainder in the toolbar of the purchase order lines. In the Update remaining quantity dialog, which is shown next, you can change or cancel the remaining quantity (deliver remainder). If you want to cancel the deliver remainder, click the button Cancel quantity in the dialog to set the deliver remainder to zero.

Figure 3-19:

Modifying or canceling a remaining line quantity in the Update quantity dialog

Once you click the button OK in the dialog, the deliver remainder in the order line is adjusted. If partial deliveries have been received already, canceling has not got an impact on these receipts – you just do not expect any further receipt. If the purchase order confirmation has been posted already, you can cancel the complete order with the button PURCHASE ORDER/Maintain/Cancel in the action pane of the purchase order. After canceling a complete order (that is, all lines of the order), the order status is “Canceled”.

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3.4.4.2 Deleting Purchase Orders and Order Lines Unlike canceling, which reduces the open quantity of an order line, deleting a purchase order line removes it from Dynamics 365. In order to delete a purchase order line, select it and click the button Remove in the toolbar of the order lines, or press the shortcut key Alt+Del. If you want to delete a complete order, click the button Delete in the action pane at the top of the detail form or – after selecting the order header – press the shortcut key Alt+Del. Once you have posted the order confirmation or submitted the order for approval, it is not possible to delete the order completely. If you want to delete an order line in an approved order which is subject to change management, you have to request a change (button PURCHASE ORDER/Maintain/Request change, see section 3.4.3). Note: If you want to delete an order line, click the Remove button in the toolbar – not the button Delete in the action pane which deletes the complete order.

3.4.5

Purchase Inquiries and Order Confirmations

Once the order entry is and – if required – the approval process is completed, the approval status of the purchase order is “Approved”. In this status, you can optionally post a purchase inquiry before you post the required purchase order confirmation. If you use the vendor portal in Dynamics 365, post a Confirmation request (instead of the purchase inquiry) for vendor validation on the portal.

3.4.5.1 Purchase Inquiries The purchase inquiry is an optional document that you can send to the vendor for validation purposes. It does not create physical or financial transactions. Posting the purchase inquiry sets the approval status of the order to “In external review”. In order to post the purchase inquiry, click the button PURCHASE/Generate/Purchase inquiry in the purchase order. In the Purchase inquiry dialog, you can select settings for posting and printing as described below for the order confirmation. If the vendor wants you to apply changes to the purchase order, you can update the order and – if change management is activated – approve the changes in the approval workflow before posting another purchase inquiry for the same order.

3.4.5.2 Purchase Order Confirmations The purchase order confirmation is a mandatory document that you have to post before you can record a product receipt. In parallel to posting the confirmation, you usually print it (physically or electronically) and send it to the vendor. Confirming a purchase order means to save it unchangeably and separately from the current purchase order. The confirmation shows the document which has been sent to the vendor. It does not create physical or financial transactions.

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In order to confirm a purchase order, select the order and click the button PURCHASE/Generate/Confirmation in the purchase order form. Alternatively, you can click the button PURCHASE/Actions/Confirm which executes the same functionality (but without showing the posting dialog). The option to confirm a purchase order is also available on applicable tabs in the tabbed list pane of the workspace Purchase order preparation.

3.4.5.3 Posting Dialog for Order Updates

Figure 3-20:

Accessing the printer setup in the Confirm purchase order dialog

When you post an update of the purchase order (the purchase order confirmation also is a posting), a posting dialog with the following options is shown:  Parameters / Quantity – “Ordered quantity” is the only option for the purchase order confirmation, posting the total quantity of all lines. Additional options are available for other transactions (e.g., for the receipts list that is described later).  Parameters / Posting – If set to “Yes”, the order confirmation is posted. If set to “No”, the output is a pro forma document.  Parameters / Late selection – Relevant for the filter selection of summary updates which are submitted to a batch process (described later in this section).  Print options / Print – If you select multiple orders for a summary update, the option “Current” prints documents separately while posting, whereas “After” starts printing after the last document has been posted.  Print options / Print purchase order – If set to “Yes”, the document is printed. Otherwise, the document is posted is without printing (reprinting is possible).  Print options / Use print management destination – If set to “Yes”, the settings specified in the print management are used. Otherwise, settings which you specify with the button Printer setup in the toolbar of the posting dialog apply.

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You can access the print management settings in the menu item Procurement and sourcing> Setup> Forms> Form setup (click the button Print management on the tab General) or, at vendor level, in the vendor form (click the button GENERAL/Set up/ Print management). In order to post the document finally, click the button OK in the posting dialog. If the slider for printing is set to “Yes” in the dialog, depending on the selected settings for printing the document is printed on a printer, or saved as a file, or shown in a print preview.

3.4.5.4 Pro Forma Documents In the Confirm purchase order dialog, you can select to print a document while the slider Posting is set to “No”. Dynamics 365 generates a pro forma document in this case. A pro forma document, which can be required for purposes like customs declaration, is not a posted document. For this reason, it is not possible to reprint or display the document separate from the purchase order. Instead of the regular button for posting order confirmations, you can use the button PURCHASE/Generate/Pro forma confirmation in the purchase order to generate a pro forma confirmation. In the posting dialog for pro forma documents, the setting of the slider Posting is always “No”.

3.4.5.5 Summary Updates Apart from the button in the purchase order form, the related periodic activity for summary updates is another option to post a document. The summary order confirmation (Procurement and sourcing> Purchase orders> Purchase order confirmation> Confirm purchase orders) opens the same posting dialog as the button for order confirmation in the purchase order. But whereas a filter on the current order is automatically set when you access the posting dialog from a purchase order, the summary update requires manually entering a filter. You can set this filter with the button Select in the toolbar of the tab Settings of the posting dialog. A dialog with an advanced filter, in which you can select the applicable purchase orders, is shown then. Once you close the filter dialog with the button OK, the selected orders are shown on the tab Overview of the posting dialog. If you do not want to post a particular order that is listed on this tab, delete the respective line in the dialog. Then post the document with the button OK. The slider Late selection in the posting dialog is relevant if you submit the order confirmation to a batch process (see section 2.2.1): If this slider is set to “Yes”, Dynamics 365 searches for orders which meet the filter criteria at the time the batch process is executed. Otherwise, posting is executed for the orders that are selected at the time when originally entering the filter (in a recurring batch process this would mean that always the same orders are selected).

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3.4.5.6 Inquiries and Document Reprint After posting a document in the purchase order, the posted document is stored separately. Later amendments of the order have no impact on the posted document. If you want to view the posted purchase order confirmation, click the button PURCHASE/Journals/Purchase order confirmations in the purchase order form or open the menu item Procurement and sourcing> Purchase orders> Purchase order confirmation> Purchase order confirmations. The button PURCHASE/Journals/Purchase inquiry in the purchase order provides access to posted Purchase inquiry documents.

Figure 3-21:

Reprint options in the purchase order confirmation inquiry

The tab Overview in the purchase order confirmation inquiry is showing all posted purchase order confirmations. Select an order confirmation header on this tab and switch to the tab Lines if you want to view the related lines. If you want to display a print preview of the posted order confirmation, click the button Preview/Print> Copy preview or Preview/Print> Original preview in the toolbar of the tab Overview in the inquiry. From the preview, you can reprint the document. Alternatively, use the button Preview/Print> Use print management to print one or more order confirmations directly from the order confirmation inquiry (printing to the printer specified in the print management, see section 4.2.1).

3.4.5.7 New in Dynamics 365 Compared to Dynamics AX 2012, there is the confirmation request for purchase order validation in the vendor portal.

3.4.6

Case Study Exercises

Exercise 3.7 – Purchase Order In order to avoid purchase order approvals, make sure that change management does not apply to the vendor of exercise 3.2. Then order the item of exercise 3.5 from the vendor of exercise 3.2. Enter the purchase order in the workspace Purchase order preparation. Which quantity and which price are shown in the order line, where do they come from? Then enter a

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second order line with two hours of the procurement category “##-assembling” (entered in exercise 3.4) for a price of USD 100. In the next step, check all orders with the vendor of exercise 3.2. How do you proceed and how many orders are shown? Exercise 3.8 – Order Confirmation Post and print the purchase order confirmation for the order which you have created in exercise 3.7. Generate a PDF file for the order confirmation. Then change the quantity in the first line of the order of exercise 3.7 to 120 units. How do you proceed? Post the confirmation and display it as a print preview.

3.5

Item Receipts

Once an ordered item arrives in the warehouse, you want to post an item receipt which makes the item available in inventory.

3.5.1

Basics of Item Receipts

In order to check whether the required items arrive on time, use the workspace Purchase order receipt and follow-up. This workspace shows the delayed and the pending receipts on lists in the center pane and provides access to the related backorder lines. Apart from the workspace, there are inquiries and reports which are designed to review open purchase order lines. These inquiries include:  Procurement and sourcing> Purchase orders> Purchase order follow-up> Backorder purchase lines – List page showing open order lines with a confirmed delivery date on or before the To date entered in the filter area of the list page.  Procurement and sourcing> Purchase orders> Purchase order follow-up> Open purchase order lines – Inquiry showing all open order lines (use the filter pane, the grid filter, or the advanced filter to select relevant records). You can optionally print a receipts list if you need to prepare the item receipt. This list is only used for information purposes (e.g., for the vendor or for the warehouse responsible). Apart from the receipts list, the warehouse responsible can also use the arrival overview form to view and prepare expected receipts. The item receipt in inventory includes two consecutive steps (see Figure 3-22):  Inventory registration – You can record the inventory registration, which preliminarily increases the on-hand quantity in inventory, directly from the order line, or in an item arrival journal, or in mobile device transactions (with the advanced warehouse management).  Product receipt – The product receipt is posting the final physical inventory transaction and – depending on the setup – general ledger transactions for the item receipt. The inventory registration before the product receipt is optional.

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Whereas you can execute the inventory registration before posting a purchase order confirmation, is not possible to post the product receipt before the purchase order confirmation.

Figure 3-22:

Options for processing the item receipt

Depending on the particular requirements and on the setup, it is possible to skip the inventory registration and the product receipt for a purchase order. If you skip the product receipt, Dynamics 365 posts it when you post the vendor invoice.

3.5.2

Receipts Lists

The way of posting a receipts list is similar to a purchase order confirmation: If you want to generate a receipts list, you have to access the related posting dialog. The receipts list is optional, and it does not create transactions in inventory or finance. In order to post and print a receipts list, open the purchase order list page, select the order and click the button RECEIVE/Generate/Receipts list. Alternatively, you can open the posting dialog with the menu item Procurement and sourcing> Purchase orders> Receiving products> Post receipts list and enter a filter with the button Select. The receipts list is not a very common document, but you can use it for information purposes regarding an expected item receipt.

3.5.3

Inventory Registration

Inventory registration is a preliminary step before posting the product receipt. The options, which are available for inventory registration, are depending on the warehouse policy. With reference to the required level of detail, Dynamics 365 is supporting two core warehouse policies:  Basic approach – No license plate management (for pallets and other handling units) and no detailed tracking of transactions within the warehouse.  Advanced warehouse management – Detailed planning and tracking of warehouse work with license plates (which represent handling units).

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Depending on the warehouse policy, there are following ways for processing the inventory registration:  Basic approach o Registration form – From the order line (e.g., for entering serial numbers). o Item arrival journal – In inventory, separate from the purchase order form. o Arrival overview – Optional prior step to item arrival journals.  Advanced warehouse management o Mobile device – Record transactions on the mobile device. Inventory registration is only possible for stocked items (specified by the checkbox Stocked product in the item model group). The item model group of the purchased item also controls whether you have to post a registration before the product receipt (checkbox Registration requirements on the tab Inventory policies in the item model group). It is not possible to use the inventory registration for order lines which contain a procurement category or a non-stocked item. You can only post a product receipt for these lines. This section explains the inventory registration in the basic approach for warehouse management. Section 8.1.2 contains the details on how to process item receipts with the advanced warehouse management.

3.5.3.1 Registration in a Purchase Order Line If it is required to register the item quantity before posting the product receipt, the usual approach is to post an item arrival journal or, in the advanced warehouse management, to register mobile device transactions. But you can also record the inventory registration without these advanced options – for example, if you need to split the transaction of a single order line into multiple lines with different locations, batch numbers, or serial numbers. In order to access the item registration from the purchase order form, select the respective order line and click the button Update line/Registration in the toolbar of the tab Purchase order lines. The inventory registration form is divided among two tabs: The tab Transactions in the upper pane, which shows the status of the inventory transaction(s) that are linked to the selected order line, and the tab Registration lines in the lower pane, in which you can post the registration. When you access the inventory registration from a purchase order line, the tab Transactions initially shows a single inventory transaction, which has been created when entering the order line. This transaction is split into multiple lines if you post partial deliveries, or if you split the line manually. If you want to register inventory dimensions for batch or serial numbers (if applicable), you can split a line with the button Split or Create serial numbers in the toolbar of the tab Transactions.

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Figure 3-23:

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Registering a receipt in the inventory registration form

In order to record the inventory registration, insert appropriate lines on the tab Registration lines either manually with the button Add on this tab, or with the button Add registration line in the toolbar of the tab Transactions (see Figure 3-23). Before posting the registration with the button Confirm registration on the tab Registration lines, you can change the warehouse, the quantity, and applicable inventory dimensions as required. You can record a partial registration by entering a smaller than the original quantity on the tab Registration lines. In this case, the inventory transaction is split into two lines – one with the registered quantity, and one with the remaining quantity. If you have already started the registration on the tab Registration lines and you want to cancel it before posting, click the button Remove all. Removing the registration lines restores the registration as it has been before starting the current registration.

3.5.3.2 Registration Status Once the inventory registration is posted, the registered quantity is available in inventory, and the status of this quantity is “Registered”. After registration, you can transfer, sell, or consume the registered quantity as required. The Line quantity form (access with the button GENERAL/Related information/Line quantity in the purchase order) shows the posted quantity in the column Registered. Unlike product receipt and invoice posting, which generate voucher documents with unchangeable transactions, the inventory registration is a preliminary

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transaction. If you reset an inventory registration (reverse as described below), the original registration is not visible as a posted transaction anymore. The only transaction which you can still view after resetting a registration is the posted item arrival journal (if registration has been posted through an item arrival journal), or transactions in the advanced warehouse management (if the registration has been posted on mobile devices).

3.5.3.3 Item Arrival Journals If you need to register item receipts in the warehouse separately from product receipt posting in the office, you can use item arrival journals. Posting an item arrival journal generates the same transactions in inventory and in purchasing as the registration directly in the purchase order line. Registering and posting an item arrival journal (Inventory management> Journal entries> Item arrival> Item arrival) works similar to the procedure in other inventory journals (see section 7.4.2).

3.5.3.4 Arrival Overview The form Inventory management> Inbound orders> Arrival overview gives an overview of the expected item arrivals. You can enter filter criteria like the date range of expected receipts (Days back, Days forward), the warehouse, or the vendor (Account number) on the tabs Arrival options and Arrival query details of this form. The button Update in the action pane then applies the selected criteria. If you want to use the same filter criteria repeatedly, create one or more profiles with appropriate filter settings (click the button Arrival overview profiles or New arrival overview profile for this purpose). On the tab Arrival options of the arrival overview, you can subsequently select an Arrival overview profile name. Then select the receipts for arrival (use the checkbox in the column Select for arrival on the tab Receipts or the tab Lines) and click the button Start arrival in the toolbar of the tab Receipts. Starting the arrival creates, but does not post, an item arrival journal for the selected lines (the journal name is given on the tab Arrival options). In order to post the arrival journal, open the item arrival journals (Inventory management> Journal entries> Item arrival> Item arrival). Alternatively, click the button Journals/Show arrivals from receipts in the toolbar of the arrival overview tab Receipts after selecting the receipt, for which you have started the arrival. With the button Journals/Product receipt ready journals in the arrival overview, you can show posted arrival journals, for which the product receipt (see section 3.5.4 below) has not been posted yet.

3.5.3.5 Reversing an Inventory Registration In order to reverse (cancel) a registration, which has been posted in the item arrival journal or the registration form, select the respective order line in the purchase order form and open the registration form.

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On the tab Transactions of the registration form, click the button Add registration line for the particular transaction. Then post the transaction like a regular inventory registration, but with a negative quantity.

3.5.4

Product Receipts

Posting the product receipt (vendor packing slip/delivery note) generates the physical inventory transaction, which finally receives the item in an unchangeable voucher document.

3.5.4.1 Posting Dialog for Product Receipts The way to post a product receipt is similar to a purchase order confirmation. If you want to post the product receipt from the purchase order form, select the order and click the button RECEIVE/Generate/Product receipt. The posting dialog then shows the familiar format. In the lookup field Quantity on the tab Settings, select the applicable option depending on the prior process:  Registered quantity – Select this option, if an inventory registration (item arrival) has been posted before the product receipt. Dynamics 365 initializes the posting lines with the registered (not yet received) quantity.  Registered quantity and services – In addition to the registered quantity for order lines with inventoried items, the ordered quantity is the default receipt quantity in order lines with product categories and non-inventoried items.  Ordered quantity – Dynamics 365 inserts the total remaining quantity.  Receive now quantity – Dynamics 365 inserts the quantity of the order line column Receive now. The posting quantity is shown in the column Quantity on the tab Lines in the lower pane of the posting dialog. If required, edit the quantities before you post the receipt finally. The other parameters in the posting dialog are similar to the purchase order confirmation parameters (see section 3.4.5), except for the following fields/options:  Product receipt – Column on the tab Overview of the posting dialog, in which you have to enter the packing slip number of the vendor.  Print product receipt – Slider on the tab Parameters of the posting dialog, which is usually set to “No” because you probably don’t print an own document when receiving the vendor’s packing slip. If an exclamation mark (!) is shown in front of a product receipt record on the tab Overview of the posting dialog, it indicates an issue with posting. A possible reason is that the selected quantity in the posting dialog is “Registered quantity”, but there has not been an inventory registration before the product receipt. Depending on the situation, you can select the option “Ordered quantity” in the lookup field Quantity of the posting dialog to solve this issue.

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3.5.4.2 Product Receipts in Summary Updates and Item Arrival Journals Similar to the options for the purchase order confirmation, the posting dialog for product receipts is also available as a periodic activity in the menu (for summary updates). If you access the posting dialog from the menu (Procurement and sourcing> Purchase orders> Receiving products> Post product receipt), you have to enter a filter with the button Select. After closing the filter dialog, you can optionally collect multiple purchase orders into one collective product receipt (click the button Arrange for this purpose). You can find more details on how to arrange orders into collective documents in section 4.6.2. If an item arrival journal has been posted for the purchase order, you can also open the Posting product receipt dialog with the button Functions/Product receipt in the action pane of the item arrival journal. If a Packing slip number has been entered on the tab Journal header details of the item arrival journal before posting, it is the default value for the Product receipt number in the Posting product receipt dialog.

3.5.4.3 Canceling a Product Receipt If you want to cancel a posted product receipt, use the Cancel feature in the product receipt inquiry. Open the product receipt inquiry (e.g., with the button RECEIVE/ Journals/Product receipt in the purchase order form) for this purpose and select the respective receipt. Then click the button Cancel in the toolbar of the tab Overview. If you only want to reduce the posted quantity, click the button Correct in the product receipt inquiry. Canceling and correcting a product receipt does not change the original transaction, but posts a new transaction which offsets the original one.

3.5.4.4 Ledger Integration and Settings for Product Receipt Posting If ledger integration is activated for the product receipt, Dynamics 365 posts general ledger transactions in parallel to the inventory transactions. These ledger transactions are reversed when posting the related invoice. There are two relevant settings, which enable the posting of product receipts to the general ledger:  Accounts payable parameters – The slider Post product receipt in ledger on the tab General/Product receipt has to be set to “Yes”.  Item model group – The checkbox Post physical inventory on the tab Costing method & cost recognition in the item model group of the item has to be selected. Irrespective of the parameter setting, product receipt transactions of items with the inventory model “Standard costs” are always posted to the ledger. In addition to the setting on ledger integration, the item model group contains two more relevant settings for product receipts: The checkbox Registration requirements in the item model group controls whether you have to post the inventory

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registration before posting the product receipt. The checkbox Receiving requirements controls whether posting the product receipt is required before posting the invoice.

3.5.4.5 New in Dynamics 365 Compared to Dynamics AX 2012, the module “Warehouse Management II” has been discontinued and related features (e.g., pallets) have been removed.

3.5.5

Partial Delivery, Underdelivery, and Overdelivery

You have to post a partial delivery if you do not receive the entire quantity of a purchase order line in one shipment but split into multiple shipments. In case the slider Prevent partial delivery on the sub-tab General in the purchase order line is set to “Yes”, it is not possible to post partial deliveries.

3.5.5.1 Inventory Registration of Partial Deliveries In the inventory registration, you can record partial deliveries in the registration form or, if the inventory registration is posted with an item arrival journal, enter the partial quantity in the arrival journal lines (see section 3.5.3). When you post the product receipt which refers to the inventory registration afterward, select the option “Registered quantity” in the quantity lookup field of the posting dialog.

3.5.5.2 Product Receipt of Partial Deliveries If you do not use inventory registration, you can optionally enter a Receive now quantity in the purchase order line in order to prepare the partial product receipt.

Figure 3-24:

Line quantity form for a purchase order after the receipt of a partial delivery

The Receive now quantity is one of the rightmost columns on the tab Purchase order lines of the purchase order form. Apart from the column in the purchase order lines, the Receive now quantity is also shown on the tab Receive now of the Line

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quantity form (see Figure 3-24). In order to access the Line quantity form, click the button GENERAL/Related information/Line quantity in the purchase order. In the Posting product receipt dialog, select the option “Receive now quantity” in the quantity lookup field to refer to a previously entered Receive now quantity then. Alternatively, you can skip the Receive now quantity and select the option “Ordered quantity” in the quantity lookup field of the Posting product receipt dialog. In this case, you have to enter the received quantities in the column Quantity on the tab Lines further down the posting dialog. After posting a partial delivery, the remaining quantity for further product receipts is shown in the column Deliver remainder of the Line quantity form (see Figure 3-24). The received quantity total is shown in the column Received. When you receive further partial deliveries, you can post the product receipts in the same way as described for the first delivery until the total of the received quantity corresponds to the ordered quantity.

3.5.5.3 Underdelivery and Overdelivery If you post the receipt of a quantity, which is less than the ordered quantity, Dynamics 365 posts a partial delivery unless you characterize the receipt as underdelivery (which means that you do not expect further receipts). In order to register underdelivery, select the checkbox in the column Close for receipt on the tab Lines of the posting dialog and enter the received quantity in the column Quantity (see Figure 3-25).

Figure 3-25:

Marking a receipt as underdelivery in the Posting product receipt dialog

As an alternative to the underdelivery in the product receipt, you can set the open quantity to zero by canceling the deliver remainder quantity (see section 3.4.4). But

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unlike the underdelivery option in the product receipt, canceling the deliver remainder does not execute a check whether the quantity reduction is within the allowed range for the underdelivery percentage of the order line. When you post an item receipt (inventory registration or product receipt), the transaction is an overdelivery in case the total received quantity exceeds the ordered quantity. Dynamics 365 accepts overdelivery if the exceeding quantity is less than the allowed overdelivery specified in the overdelivery percentage of the order line. You can only post underdelivery or overdelivery if the slider Accept underdelivery or Accept overdelivery on the tab Delivery of the procurement parameters is set to “Yes”. In the released product detail form (Product information management> Products> Released products), the maximum percentage for underdelivery and overdelivery in purchase orders and sales orders is specified on the tabs Purchase and Sell. The percentages in the released product are the default for the order lines. In the order lines, you can adjust the maximum underdelivery and overdelivery percentage as needed (on sub-tab Delivery of the tab Line details).

3.5.6

Order Status and Inquiries

Posting an item receipt updates the order status and the quantity in inventory.

3.5.6.1 Purchase Order Status The purchase order list page contains the column Approval status (see section 3.4.3) and the column Purchase order status. The header view of the purchase order detail form additionally shows the Document status on the tab General. Whereas the order status indicates the order progress as given by the lowest status of the purchase order lines, the document status shows the highest status of a posted document. For this reason, the order status of a purchase order may still be “Open order” while the document status is “Invoiced” in case of partial deliveries and invoices. Table 3-1 below gives an overview of receipt transactions and the related status. Table 3-1:

Order status, approval status, and document status for receipt transactions

Transaction

Approval status

Order status

Document status

(Approval)

Approved

Open order

None

Purchase inquiry

In external review

Open order

Purchase inquiry

Confirmation

Confirmed

Open order

Purchase order

Receipts list

Confirmed

Open order

Receipts list

Inventory registration

Confirmed

Open order

(No change)

Partial product receipt

Confirmed

Open order

Product receipt

Complete product receipt

Confirmed

Received

Product receipt

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With the button GENERAL/Related information/Postings in the purchase order form, you can access a form which shows the last document number of the posted transactions of the selected order. At line level, the status is shown in the field Line status on the sub-tab General of the order lines. In addition, the Line quantity form shows the quantity per status.

3.5.6.2 Inventory Transaction Status Both, the inventory registration and the product receipt, change the on-hand quantity via inventory transactions. When you enter a new purchase order line with an inventoried item, Dynamics 365 creates an inventory transaction with the Receipt status “Ordered”. You can view this transaction with the button Inventory/Transactions in the toolbar of the tab Purchase order lines. When you post an inventory registration, the receipt status of the inventory transaction changes to “Registered”. The registration date is stored in the field Inventory date, which you can view on the tab General of the Transaction details form (click the button Transaction details in the inventory transaction to access the details). If you reverse an inventory registration, the inventory date is cleared.

Figure 3-26:

Inventory transactions for an order line with two partial product receipts

When you post a product receipt, with or without a prior inventory registration, the receipt status of the inventory transaction changes to “Received”. The posting date of the product receipt is shown in the column Physical date of the inventory transaction. The Financial date in the inventory transaction remains empty until the vendor invoice is posted. Additional detail data of the transaction (e.g., the packing slip number) are shown on the tab Updates of the Transaction details form. Since you can only reverse a product receipt by posting an offset transaction, the physical date in the inventory transaction never changes after posting the receipt. If there are partial receipts, the original inventory transaction is split into two (or more) transactions with a status which refers to the posted quantity. In the example of Figure 3-26, you can view the inventory transactions for a purchase order line after posting the product receipts of two partial deliveries.

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3.5.6.3 Product Receipt Inquiry If you want to view the posted product receipts, open the menu item Procurement and sourcing> Purchase orders> Receiving products> Product receipt or click the button RECEIVE/Journals/Product receipt in the purchase order form. Select a product receipt on the tab Overview of the inquiry and switch to the tab Lines if you want to view the related receipt lines. The button Inventory/Lot transactions in the toolbar of the tab Lines provides an alternative way to access the inventory transactions.

3.5.6.4 Ledger Transactions and Transaction Origin If the ledger integration is activated for the product receipt, you can click the button LEDGER/Vouchers/Physical voucher in the inventory transaction inquiry to view the related transactions in the general ledger. If you want to view all ledger transactions that refer to a product receipt, open the product receipt inquiry and click the button Vouchers in the toolbar of the tab Overview.

Figure 3-27:

General ledger transactions related to a product receipt

The main accounts in the ledger transactions are given by the posting setup – for product receipt transactions, the accounts for the options “Cost of purchased materials received” and “Purchase, accrual” on the tab Purchase order are relevant (see section 9.4.2). The button Transaction origin in the action pane of the voucher transactions provides access to the transaction origin form, which shows all related transactions in all modules. Depending on integration settings, the product receipt is posting transactions in inventory and in the general ledger. In the example of Figure 3-28, you can view the transaction origin of the highlighted transaction in Figure 3-27. Note: For source documents like the product receipt, settings on the tab Batch transfer rules in the general ledger parameters determine, if transactions in subledgers are posted synchronously to the general ledger, or if they are summarized in a scheduled batch. The general ledger transactions shown for a product receipt are depending on this setting.

3.5 Item Receipts

Figure 3-28:

3.5.7

105

Transaction origin form with all transactions for a product receipt

Case Study Exercises

Exercise 3.9 – Product Receipt Your vendor ships the goods and services ordered in exercise 3.7 with packing slip PS309. Before posting the receipt, check following items in the purchase order:  Order status and document status.  Inventory quantity of the ordered item.  Inventory transaction for the order line of the product. Then post a product receipt for the complete order quantity (120 units for the first line after the update in exercise 3.8) with the vendor packing slip number given above. You can post the receipt directly from the purchase order form. Now review the status of the items in the list above again. What is different after product receipt posting? Exercise 3.10 – Partial Delivery and Inventory Registration Order the item of exercise 3.5 from the vendor of exercise 3.2 one more time. Enter a purchase order for 80 units and post the product receipt of packing slip PS310 with a partial delivery of 50 units. Then you receive a second shipment PS310-2 with 10 units. Due to organizational reasons, you should record an inventory registration for this receipt. Open the registration form from the purchase order line and post the registration. Do you know how to show the remaining quantity? Check the order status, the inventory quantity, and the inventory transactions like in exercise 3.9. What is different in comparison to exercise 3.9? Post the product receipt for the second shipment PS310-2 afterward. Exercise 3.11 – Product Receipt Inquiry You are asked to review the product receipt of exercise 3.9. For this purpose, open the product receipt inquiry, first from the purchase order form and then from the

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navigation pane. Review the product receipt header and lines, and check if there are related ledger transactions.

3.6

Invoice Receipts

Together with the shipment, or at a later stage, the vendor submits an invoice. Before posting the invoice, you can check it in an invoice matching procedure. Whereas product receipts update the preliminary (physical) inventory value, invoice receipts update the actual (financial) value. For this reason, posting an invoice receipt does not only increase the open vendor balance, but it also increases the financial value in inventory. Once all lines of a purchase order are invoiced, purchase order processing is completed. The payment of vendor invoices is a separate process which is described in section 9.3.3 of this book.

3.6.1

Processing Vendor Invoices

With regard to the line content and the way of processing the invoice, there are two types of vendor invoices:  Invoices related to products and procurement categories – With or without a purchase order reference.  Invoices related to ledger accounts – For example, with reference to an expense account for office rent or legal fees (see section 9.3.2). Vendor invoices, which refer to products or product categories, have to be registered and posted in the Pending vendor invoices form as described below. You can use the pending vendor invoices not only for invoices that refer to purchase orders but also for invoices that do not refer to orders (these invoices may only include lines with non-stocked products or product categories). For inventoried items, you have to process a purchase order before you can register an invoice. If a vendor invoice refers to a purchase order, it is possible to register the invoice with reference to a prior product receipt or to post the invoice and the receipt of the items (or services) in one common step. Invoice posting without a prior product receipt is useful if you receive goods or services together with the invoice and do not post a separate item receipt in the warehouse. For inventoried items, the checkbox Receiving requirements in the item model group of the item may not be activated in this case (see section 7.2.3). If required, you can pre-register vendor invoices in invoice journals (invoice register, invoice approval journal). You can find more details on invoice journals in section 9.3.2 of this book.

3.6.1.1 Vendor Invoice Registration When you receive a vendor invoice, you enter it separately from purchase orders in the pending vendor invoice form (Accounts payable> Invoices> Pending vendor

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invoices). This form shows all vendor invoices, which have been entered but not yet posted. In order to switch from the pending vendor invoice list page to the related detail form, select a particular invoice and click the link in the field Number (invoice number) or click the button Edit in the action pane. If you want to create a new pending vendor invoice, you can start in the following pages:    

Vendor invoice entry workspace (Pending) Vendor invoice form Vendor form Purchase order form

The workspace Vendor invoice entry gives an overview of chargeable documents (purchase orders and product receipts) and registered invoices, which have not been posted. You can create a pending vendor invoice with the button New vendor invoice in the workspace. If you start in the Pending vendor invoices form, click the button New in the action pane to create a new pending invoice. If you rather want to enter a new invoice in the vendor form, click the button INVOICE/New/Invoice/Vendor invoice in the action pane of this form. When you register an invoice in the pending vendor invoice form, select the vendor number in the field Invoice account first. Then select the purchase order number in the lookup field Purchase order. If you select the order number before the vendor, Dynamics 365 automatically retrieves the corresponding vendor. If you are working in the purchase order form, you can register a vendor invoice directly from the order. The button INVOICE/Generate/Invoice in the purchase order form opens the vendor invoice form and creates an invoice which is already linked to the selected order. A similar option is available in the workspace Vendor invoice entry – select a purchase order or a product receipt in the tabbed list pane of this workspace and click the button Invoice now in the toolbar of the tab for this purpose. While the pending vendor invoice form looks different from the other posting dialogs (e.g., the product receipt), the functionality is similar. Like in the other posting dialogs, the preceding business process determines which option you choose in the quantity selection (button Default from in the action pane of the pending vendor invoice):  Product receipt quantity – Common option (invoice linked to a product receipt).  Ordered quantity or Receive now quantity – Invoice independent of a product receipt.

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Figure 3-29:

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Registering a vendor invoice for a purchase order

If you select the option “Product receipt quantity” in the drop-down dialog Default quantity for lines, the quantity that is received but not invoiced is used as the default value in the column Quantity on the tab Lines of the pending vendor invoice. In order to review the product receipts which are covered by the invoice, click the button Match product receipts in the action pane of the pending vendor invoice form. In the Match dialog that is shown next, you can view the product receipts that are available for invoicing. Select or clear the checkbox in the column Match in this dialog to include or exclude particular product receipts. If the vendor only invoices a partial quantity, update the column Product receipt quantity to match in the Match dialog. Then close the dialog with the button OK and – if applicable – click “Yes” in the message bar which asks whether to update the invoice quantity. The selected product receipt is shown in the invoice header and the column Product receipt on the tab Lines (“”, if multiple receipts are assigned). If the Product receipt quantity to match is different from the quantity in the related invoice line, the invoice matches a quantity which is different to the quantity on the invoice (this can be a situation like “3 units for the price of 2”). A message when closing the Match dialog indicates this situation. If you want to register a vendor invoice independently of product receipts (e.g., if there is no prior item receipt), select the option “Ordered quantity” in the button Default from (or “Receive now quantity”, if you have already entered the invoiced quantity in the column Receive now of the purchase order lines). Then adjust the

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quantities in the invoice lines as applicable. But be aware that invoice posting, in this case, is also posting the physical receipt for any invoice quantity that exceeds the received quantity (the total quantity if there is no prior product receipt). The invoice number (mandatory field Number in the field group Invoice identification), the Posting date, the Invoice date, and the Due date (receiving the default value from the payment terms calculation) are shown on the tab Vendor invoice header of the lines view. The header view, in which you can set the slider Approved on the tab Approval to “No” if you want to exclude an invoice from payment proposals, contains more details on header level. If you want to prevent posting a particular invoice until a controversial issue is decided, set the slider On hold on the tab General of the pending vendor invoice header to “Yes”. If you create an invoice and close the pending vendor invoice form before posting, the invoice is stored for later posting (and approval, if applicable). You can still view the invoice in the pending vendor invoices. For this reason, you have to delete the invoice with the button Delete if you want to cancel invoice registration once you have started to enter an invoice. Note: Simply closing the invoice detail form after starting to register a pending vendor invoice stores the invoice. If product receipts are assigned to the invoice, you can’t assign them to a second invoice before deleting the first pending invoice.

3.6.1.2 Collective Vendor Invoices If a vendor invoice refers to multiple purchase orders, you have to post a collective invoice. Entering collective invoices in the pending vendor invoice form is different from registering collective documents for other document types (e.g., collective product receipts). In the pending vendor invoice form, click the button next to the field Purchase order to access the Retrieve purchase orders dialog. When you select purchase orders in this dialog, pay attention to the option that is selected in the button Default from in the action pane of the invoice form. This option controls whether you can select a purchase order without a prior product receipt. In addition, summary update parameters (Accounts payable> Setup> Summary update parameters) and settings at vendor level determine requirements on orders which are collected to a common invoice (similar to accounts receivable, see section 4.6.2).

3.6.1.3 Invoice Matching The details, which you enter in the pending vendor invoice form, have to match exactly the invoice which you receive from the vendor. For this reason, it is useful to compare the totals on the actual vendor invoice with the totals in the invoice detail form – review the Totals dialog (access with the button Totals) or the FactBox Invoice totals – before posting the invoice. If necessary, adjust the quantities, prices, discounts, and line amounts on the tab Lines or Line details in the lines view of the pending vendor invoice detail form.

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If invoice matching is activated, you have to click the button Update match status in the action pane of the pending vendor invoice form to execute invoice matching before you can post the invoice (depending on the setting Automatically update invoice header status on the tab Invoice validation in the accounts payable parameters, this update is executed automatically). In case the vendor invoice exceeds the tolerances specified in the invoice matching setup, the pending vendor invoice form shows status “Failed” in the field Match status on the invoice header and the related column on the tab Lines. Click the button REVIEW/Matching/Matching details in the pending vendor invoice form if you want to view the detailed results of invoice matching. Primary settings for invoice matching are specified on the tab Invoice validation in the accounts payable parameters. Invoice matching is only active if the slider Enable invoice matching validation in the parameters is set to “Yes”. In this case, the parameter Automatically update invoice header status controls whether invoice matching is executed automatically or if it is necessary to execute it manually with the button Update match status in the invoice as described above. If invoice matching is active, you can specify various tolerances and types of matching in the accounts payable parameters:  Invoice totals matching – Compares invoice total fields (invoice amount, sales tax, charges) with the purchase order.  Price and quantity matching o Line matching policy – “Two-way matching” compares the invoice price and discounts with the order line; “Three-way matching” also compares the quantity in product receipts. o Match price totals – Applies to partial deliveries and invoices, comparing the order line with the total of the current invoice line and related partial invoice lines already posted.  Charges matching – Separate settings for matching charges. If the settings in the accounts payable parameters allow overriding, you can override the invoice validation criteria at vendor level or item level in the forms of the menu folder Accounts payable> Invoice matching setup. In addition, you can use business policies (menu items in the folder Accounts payable> Policy setup) to specify matching rules which are different from the standard invoice validation settings.

3.6.1.4 Vendor Invoice Posting After you have entered a pending vendor invoice, you can optionally leave it nonposted and post it at a later stage – for example, if you have to obtain approval in an approval workflow first. If your enterprise wants to use approval workflows for pending vendor invoices, set up an appropriate workflow (with the workflow type “Vendor invoice workflow” or “Vendor invoice line workflow”) in the menu item Accounts payable>

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Setup> Accounts payable workflows. With this setup, you can post a pending vendor invoice only after approval. Once the vendor invoice is ready to be posted, click the button Post in the action pane of the pending vendor invoice form. After posting, the invoice is not shown in the pending vendor invoices anymore. It is included in the open vendor invoice form (Accounts payable> Invoices> Open vendor invoices) now, which shows all invoices that not yet paid. Posting a vendor invoice generates general ledger transactions, inventory transactions, vendor transactions, and transactions in other subledgers (e.g., sales tax if applicable). The vendor posting profile determines the summary account which is used in the vendor transaction (see section 3.2.3). The posting setup contains the settings for the main accounts which are related to the inventory transactions (see section 9.4.2).

3.6.1.5 Invoices without Order Reference Registering an invoice, which does not refer to a purchase order, is similar to entering an order in the purchase order form. Once you select a vendor in the pending vendor invoice form, the invoice retrieves numerous default values from the vendor record. You can view and edit the corresponding fields in the header view of the pending vendor invoice form. But unlike purchase order lines, new lines entered in the lines view of the invoice form may only contain non-stocked items and procurement categories. Posting the invoice works similar to posting a purchase order invoice (see above).

3.6.1.6 New in Dynamics 365 Compared to Dynamics AX 2012, there are – apart from the browser-based user interface – minor changes like the removal of the button Cancel in the pending invoice form (use the button Remove for canceling).

3.6.2

Order Status and Inquiries

Like the product receipt, the vendor invoice updates the order status and posts inventory transactions and general ledger transactions. An invoice additionally generates a vendor transaction.

3.6.2.1 Purchase Order Status and Transaction Status Depending on whether you have posted a partial or a complete invoice, the purchase order has got the following status:  Partial invoice – Order status “Received” or “Open order”, document status “Invoice”.  Complete invoice or last partial invoice – Order status “Invoiced”, document status “Invoice”.

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If you want to view the inventory transactions that refer to an order line, select the respective line in the purchase order and click the button Inventory/Transactions in the toolbar of the tab Purchase order lines. After posting the invoice, the Receipt status of the inventory transaction is “Purchased”, and the posting date of the invoice is shown in the column Financial date. The invoice number is shown on the tab Updates of the Transaction details form (click the button Transaction details in the inventory transaction to access the details).

Figure 3-30:

Inventory transactions after posting the vendor invoice

In the example of Figure 3-30, there are two inventory transactions which refer to one common purchase order line and which are included in a posted invoice.

3.6.2.2 Invoice Inquiry In order to view the posted invoice, open the menu item Accounts payable> Inquiries and reports> Invoice> Invoice journal or click the button INVOICE/Journals/Invoice in the purchase order form. Select an invoice on the tab Overview of the inquiry and switch to the tab Lines if you want to view the related invoice lines. The button Inventory/Lot transactions in the toolbar of the tab Lines provides an alternative way to access the inventory transactions described above.

3.6.2.3 Ledger Transactions and Transaction Origin If you want to view the general ledger transactions that refer to a vendor invoice, click the button Voucher in the toolbar of the tab Overview in the invoice inquiry to open the voucher transaction form. Alternatively, you can access the voucher transactions with the button Ledger/Financial voucher in the inventory transaction inquiry (in this case, only the ledger transactions related to the particular inventory transaction are shown). The voucher transaction form displays all general ledger transactions related to the posted invoice, including the following transactions:  Transactions which reverse the packing slip.  Vendor summary account transaction – For the vendor balance (specified in the vendor posting profile).

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 Stock account transaction – For the inventory items (specified in the posting setup).  Input tax transaction – For the sales tax, if applicable (specified in the ledger posting group of the sales tax code). You can find more details on the setup of the vendor posting profile in section 3.2.3, and on the posting setup in section 9.4.2. Note: Like for the product receipt, settings on the tab Batch transfer rules in the general ledger parameters determine whether vendor invoices are summarized when posting to the general ledger. If they are summarized, not all described transactions are available at the level of an individual invoice. The button Transaction origin in the voucher transactions provides access to the transaction origin form. This form shows the transactions in all modules which refer to the voucher – apart from the ledger transactions it includes the vendor transactions, the inventory transactions, and the tax transactions as applicable.

3.6.3

Case Study Exercises

Exercise 3.12 – Purchase Order Invoice Your vendor transmits the invoice VI312, which includes the goods and services received in exercise 3.9. Before you post the invoice, check following items:  Order status and document status of the purchase order.  Inventory transaction for the order line with the product. Then register and post the vendor invoice with the received quantity in the pending vendor invoice page. Check the invoice total before you post the invoice. Now review the status of the items in the list above again. What is different? Exercise 3.13 – Partial Invoice for a Purchase Order You receive the invoice VI313, which includes the goods received with packing slip PS310 in exercise 3.10. Post the vendor invoice from the purchase order form and make sure that the posted invoice only contains the items received with packing slip PS310. Exercise 3.14 – Vendor Invoice Not Related to an Order Your vendor now submits the invoice VI314, which contains a line with one hour of the procurement category “##-assembling” (created in exercise 3.4) for a price of USD 105. The invoice does not refer to a purchase order. You accept this invoice and want to register it in the pending vendor invoice page. Check the invoice total before you post the invoice. Exercise 3.15 – Invoice Inquiry You want to review the invoice that you have posted in exercise 3.12. For this purpose, open the invoice inquiry, first from the purchase order form and then

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from the navigation pane. Check the invoice header, the lines, and the related ledger transactions. In exercise 3.3, you have been looking for the vendor summary account. Can you find the ledger transaction for this account? Then open the transaction origin form and check in which modules the invoice has posted transactions.

3.7

Vendor Credit Notes and Item Returns

If you receive a credit note from a supplier, you have to register and to post it. Posting a vendor credit note works similar to posting a vendor invoice, except that credit notes require a negative quantity. Like vendor invoices, vendor credit notes are grouped into following types:  Credit notes for inventoried items – Items are returned to the vendor.  Credit notes for intangible items – Services, fees, or licenses. For inventoried items, vendor credit notes have to be registered in the purchase order form. Processing this purchase order includes the (negative) product receipt for the item return and the (negative) invoice for the financial credit note. If you do not post the item return separately, posting the invoice (credit note) posts the item return of inventoried items in parallel. If the item model group does not allow a negative physical inventory, you can only post the return if the item is still in stock. In case you have to reverse a product receipt, but not a vendor invoice, use the functionality for canceling product receipts (see section 3.5.4). For intangible items, you can register a vendor credit note in following forms (similar to invoices for intangible items):  Purchase order – Order lines with non-stocked items (or procurement categories) and a negative quantity.  Pending vendor invoice – Invoice lines with non-stocked items (or procurement categories) and a negative quantity.  Invoice journal – Journal lines with offset ledger accounts (see section 9.3.2). In the purchase order or the pending vendor invoice form, you can process credit notes for intangible items in a similar way to credit notes for inventoried items, but there is no inventory transaction and no inventory value for intangible items.

3.7.1

Crediting and Returning

In the purchase order form, you have to process credit notes for inventoried items in one of the following ways:  Original purchase order – Register a new line in the original order.  New purchase order – Purchase type “Purchase order” or “Returned order”. The first option – using the original purchase order for the credit note – is not available, if the approval status of the order is “Finalized”, or if the order is

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completely invoiced, and the procurement parameter Safety level of invoiced orders (Procurement and sourcing> Setup> Procurement and sourcing parameters, tab Delivery) is set to “Locked”.

3.7.1.1 Credit Note in the Original Purchase Order If you want to record a credit note in a new line in the original purchase order, open this purchase order in edit mode and insert a regular order line – but with a negative sign in the column Quantity. If you expect a replacement from the vendor, you can enter a second purchase order line with a positive quantity for the replacement. Depending on change management settings, the purchase order may be subject to approval before it is possible to confirm it. Once you have posted the confirmation, you can start posting the credit note with the button INVOICE/Generate/Invoice in the purchase order. In the pending vendor invoice form, be aware of the posting quantity: In most cases, you can simply click the button Default from in the action pane of the invoice form and select the option “Ordered quantity”. If there is no other order line with an open quantity (apart from the line with the negative quantity), only this line is shown on the tab Lines of the invoice form. Otherwise, you have to delete the lines in the posting dialog which you do not want to post. Then enter the credit note number in the invoice number (field Number in the field group Invoice identification) before you can finally post the credit note with the button Post in the action pane of the pending vendor invoice form. If the checkbox Deductions requirement in the item model group of the credited item is selected, you have to post a (negative) product receipt for the item return before you can post the credit note (negative invoice).

3.7.1.2 Credit Note in a New Order If you want to use a new order for the credit note, you can enter a regular purchase order (Purchase type “Purchase order”) with order lines with a negative quantity. Alternatively, you can select the Purchase type “Returned order” when you create the order (field on the tab General in the Create purchase order dialog). If you use the purchase type “Returned order”, there are the following characteristics:  RMA number – The return merchandise authorization provided by the vendor has to be entered in the field RMA number in the Create purchase order dialog.  Quantity – Has to be negative in all order lines.  Return action – For information purposes, displayed on the sub-tab Setup of the purchase order lines (you can specify a default in the procurement parameters). In order to facilitate entering the credit note, you can create the order lines in the new purchase order with the button PURCHASE/Create/Credit note in the action pane or the button Purchase order line/Credit note in the toolbar of the order lines. The Create credit note feature is a special version of the copy feature for purchase

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orders (see section 3.4.2) in which you can only copy invoices or invoice lines. Compared to the regular copy feature, creating a credit note reverses the quantity sign, creates a reservation, and applies inventory marking (exactly offsetting the inventory value of the original line). Depending on whether you add credit note lines to an existing or a new order, you have to pay attention to the checkbox Delete purchase lines in the Create credit note dialog.

3.7.1.3 Inventory Marking In order to avoid unintended changes of the inventory value, you can use inventory marking to assign the value of the returned/credited item to the corresponding original receipt. For this purpose, select the new order line (credit note line) in the purchase order form and click the button Inventory/Marking in the toolbar of the purchase order lines. In the Marking dialog that is shown next, select the checkbox in the column Set mark now (marking the original order line now returned) and click the button Apply. The inventory value of the new line entered for crediting now exactly offsets the inventory value received from the original line. Without marking, Dynamics 365 calculates the (outbound) inventory value of the credit note according to the item model group of the item – for example applying a FIFO calculation for an item with a FIFO valuation model. Depending on the valuation model, the value of the transaction is not known finally before inventory closing (see section 7.3.2).

3.7.1.4 Transaction Settlement If the original invoice has not been paid and settled yet, you can immediately close the open vendor transaction of the original invoice when posting the credit note. For this purpose, click the button INVOICE/Settle/Open transaction in the action pane of the crediting purchase order. In the Settle transaction dialog that is shown next, select the checkbox in the column Mark of the appropriate invoice and click the button OK. Posting the credit note then closes the open vendor transaction of the invoice. If you do not settle the invoice when registering the crediting purchase order, the responsible person has to settle the invoice and the credit note in the open transactions later on (see section 9.2.5). When working with settlements, take into account that there is no manual settlement if an automatic settlement is selected in the applicable vendor posting profile (tab Table restrictions) or the accounts payable parameters (tab Settlement).

3.7.2

Credit Notes without Item Return

If you receive a credit note from a vendor, which covers a price reduction (e.g., a refund for slightly damaged goods), there is no actual physical return of an item.

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3.7.2.1 Crediting and Re-Invoicing The easiest way to process such a refund is to register and to post a purchase order with two lines: One line with a negative quantity and the original price (credit note) and one line with a positive quantity and the new price (invoice).

3.7.2.2 Crediting and Allocating Charges If this is not suitable – for example, if you have already shipped or consumed the credited goods – you have to post a credit note which does not directly refer to the item. The credit amount has to be allocated to the item separately in this case. There are two ways to enter this credit note:  Pending vendor invoice form – Enter an invoice line with negative quantity and an appropriate procurement category.  Invoice journal – Enter a journal line with a negative amount and an appropriate ledger account (see section 9.3.2). Once you have posted the credit note, you can record a charges transaction to adjust inventory valuation if applicable. For this purpose, select the original invoice in the invoice inquiry (Accounts payable> Inquiries and reports> Invoice> Invoice journal) and click the button Charges/Adjustment in the toolbar of the tab Overview. In the Allocate charges dialog that is shown next, enter a line for the charges transaction. The lookup in the field Charges code of this dialog only shows charges with the Debit type “Item” and the Credit type “Ledger account”. You can offset the balance on the credit ledger account – select a charges code which refers to the same ledger account that you have used in the credit note. The ledger account on the credit note is either determined by the procurement category (in the pending vendor invoice form) or entered as offset account in the invoice journal. You can find more details on the general use of charges in section 4.4.5 of this book, and information on the Allocate charges dialog in the online help.

3.7.3

Case Study Exercise

Exercise 3.16 – Vendor Credit Note The goods received in exercise 3.9 show serious defects. You return them to the vendor and receive the credit note VC316. The vendor does not send a replacement. Which ways do you know for registering the credit note? You decide to register the credit note in the original order. Enter the required data and post the credit note.

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3.8

3 Purchase Management

Purchase Agreements, Requisitions, and Quotation Requests

Purchase orders are the only documents which are a basis for product receipts and vendor invoices in procurement. Other documents in purchasing are used in business processes which prepare to create a purchase order.

3.8.1

Purchase Agreements

Purchase agreements provide the option to register and to follow up on blanket orders. Apart from agreements at the level of product number and quantity, there are agreements which specify the total amount per product (and not the quantity), and agreements at the level of product categories or vendor totals.

3.8.1.1 Managing Purchase Agreements In order to create a purchase agreement, open the menu item Procurement and sourcing> Purchase agreements> Purchase agreements and click the button New in the action pane. In the Create dialog, you have to select a Purchase agreement classification for the new agreement. Agreement classifications (Procurement and sourcing> Setup> Purchase agreement classification) are only used for grouping and reporting purposes and do not refer to specific functionality. The field Default commitment on the tab General in the dialog determines the level of the agreement:    

Product quantity commitment – Product number and quantity. Product value commitment – Product number and value. Product category value commitment – Value of a product category. Value commitment – Total value for a vendor.

The fields Effective date (start date of the contract) and Expiration date (end date) in the dialog are used as a default for the agreement lines. Once you close the dialog with the button OK, Dynamics 365 creates the purchase agreement header and switches to the purchase agreement detail form in the lines view. In the agreement lines, you can enter a new line with the Item number, Quantity, Unit price, and Discount percent (or Net amount and Procurement category, depending on the option selected in the Default commitment). If you want to prevent, that the total quantity of related release order lines exceeds the quantity in the agreement, set the slider Max is enforced on the sub-tab General of the order lines to “Yes”. Once you have completed the agreement lines, you can click the button PURCHASE AGREEMENT/Generate/Confirmation in the action pane to confirm and print the agreement. In the Confirm purchase agreement dialog, set the slider Print report to “Yes” if you want to print the confirmation. In addition, you can set the slider Mark agreement as effective to “Yes” if you want to set the Status in the agreement header to “Effective”.

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If you do not set the agreement to effective when posting the confirmation, you have to change the Status in the agreement header from “On hold” to “Effective” manually before you can generate a release order.

3.8.1.2 Release Orders In order to create a release order in the purchase agreement form, select the agreement and click the button PURCHASE AGREEMENT/New/Release order. In the Create release order dialog which is shown next, select the items for the release order by entering the Purchase quantity and the Delivery date. Then click the button Create in the dialog to generate the new release order (a regular purchase order with the type “Purchase order”). Instead of creating a release order in the purchase agreement form, you can start by creating a regular order in workspace Purchase order preparation or the purchase order form. On the tab General in the Create purchase order dialog, select the Purchase agreement ID to indicate that the order is a release order for the respective agreement. When you enter an order line with an item which is covered by the agreement, Dynamics 365 generates a link automatically. If you create a new purchase order in the vendor form and there is an applicable agreement, a dialog is shown in which you can select the agreement. In the release order, you can post the order confirmation, the product receipt, and the vendor invoice like in any other purchase order. When you post the product receipt or the invoice, the order fulfillment in the related purchase agreement is updated. The fulfillment is shown on the sub-tab Fulfillment of the lines in the purchase agreement. If you want to check the link from a purchase order line to the purchase agreement, click the button Update line/Purchase agreement/Attached in the toolbar. At header level, there is the button GENERAL/Related information/Purchase agreement in the action pane.

3.8.2

Purchase Requisitions

A purchase requisition is an internal document which asks the purchasing department to supply particular goods or services. Unlike a planned order, which is created automatically in master planning because of an applicable item demand, a purchase requisition has to be entered manually.

3.8.2.1 Prerequisites for Processing Purchase Requisitions Before you can transfer a purchase requisition to a purchase order, an approval process has to be completed. This approval process is based on the workflow management in Dynamics 365. In order to configure the purchase requisition workflow, open the menu item Procurement and Sourcing> Setup> Procurement and sourcing workflows. Workflows for purchase requisitions refer to the workflow type “Purchase requisition review” and, if necessary for the approval process, “Purchase requisition line review”.

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Products and categories, which are available in purchase requisitions, have to be registered and activated in an appropriate procurement catalog (Procurement and Sourcing> Catalogs> Procurement catalog). In the purchasing policies (Procurement and Sourcing> Setup> Policies> Purchasing policies), make sure that this catalog is selected in the Policy rule “Catalog policy rule” of the policy which applies to your organization. The Policy rule “Requisition purpose rule” determines whether the Requisition purpose in all purchase requisitions is “Consumption” (approved purchase requisitions are directly transferred to purchase orders), or “Replenishment” (master planning needs to be executed to generate purchase/production/transfer orders for approved purchase requisitions), or if you can override the requisition purpose in the particular purchase requisitions. For purchase requisitions with the requisition purpose “Replenishment”, the policy rule “Replenishment category access policy” determines the procurement categories which you can select (this includes the items assigned to these procurement categories).

3.8.2.2 Entering Purchase Requisitions In order to create a purchase requisition, open the menu item Procurement and Sourcing> Purchase Requisitions> All purchase requisitions and click the button New in the action pane. In the Create dialog, enter a name for the requisition before you click the button OK. The way in which you enter a requisition line depends on the type of the item:  Internal catalog items – Enter a regular released product, which is included in the current procurement catalog, in the column Item number.  Non-catalog items – In requisitions with the Requisition purpose “Replenishment”, you can enter a Procurement category and a Product name (description) to request a service or new product without an item number.  External catalogs – If external catalogs (Procurement and Sourcing> Catalogs> External catalogs) and the integration settings with the vendor have been configured, you can click the button External catalogs in the toolbar of the requisition lines to access the vendor website, in which you order products that are transferred to the purchase requisition. You can enter requisition lines with an item number or procurement category on the tab Purchase requisition lines manually, but you can also click the button Add products in the toolbar of the lines. In the related Add products dialog, select an item which meets the filter on procurement categories in the left pane. Then click the button Add to lines in the middle pane. Finally, click the button OK at the bottom of the dialog to transfer the items to the requisition lines. Depending on purchasing policy settings, you can enter a requisition line on behalf of another person or organization – select the appropriate Requester, Buying legal entity, or Receiving operating unit in this case.

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3.8.2.3 Approval Workflow The initial status of a purchase requisition is “Draft”. Once the purchase requisition is complete, click the button Workflow/Submit in the action pane to start the purchase requisition workflow. The requisition status switches to “In review” and the workflow system starts processing the submitted requisition in a batch process. The further approval process is depending on the workflow configuration of the purchase requisition workflow. Section 10.4 in this book contains a brief description on how to configure and to process workflows. As long as a purchase requisition shows the status “In review”, you can create a request for quotation (see section 3.8.3) for the requisition – click the button PURCHASE REQUISITION/New/Request for quotation in the purchase requisition for this purpose.

3.8.2.4 Creating a Purchase Order Once a purchase requisition is approved, the status changes to “Approved” and you can release the requisition to a purchase order. If purchase requisitions are released automatically, Dynamics 365 skips the status “Approved” and sets the status “Closed” immediately. In the purchasing policies, the Policy rule “Purchase order creation and demand consolidation” (in the policy for your organization) determines if purchase orders are generated automatically or if they have to be released manually. If manual releasing is necessary, click the button RELEASE/New/Purchase order in the list page Procurement and sourcing> Purchase requisitions> Approved purchase requisition processing> Release approved purchase requisitions to release an approved purchase requisition to a purchase order.

3.8.2.5 New in Dynamics 365 An integration functionality for external catalogs (vendor web shops) that is similar to the functionality which has been included in Dynamics AX 2012, but not in Dynamics AX 7, is available now.

3.8.3

Requests for Quotation

A request for quotation (RFQ) is an external document which asks vendors to submit a quotation. One request for quotation can include multiple vendors. Once you receive a quotation from a vendor, register it in a “Request for quotation reply” as a preparation for a comparison of quotations. If you accept a quotation, you can transfer it to a purchase order.

3.8.3.1 Entering Requests for Quotation You can create a request for quotation manually in the request for quotation form, or generate it from planned purchase orders or purchase requisitions.

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Entering RFQ lines in the request for quotation form

In the request for quotation form (Procurement and sourcing> Requests for quotations> All requests for quotations), you can create a new request for quotations with the button New. Select the Purchase type “Purchase order” in the Create dialog, if you want to enter a request which should finally create a regular purchase order, or “Purchase agreement” if you want to prepare a purchase agreement. The Purchase type “Purchase requisition”, which you can’t select manually, indicates that the request for quotation is generated from a purchase requisition. Enter the delivery date and the expiration date in the dialog before you close it with the button OK. Requests for quotation consist of a header and one or more lines. The header contains common data like the language and the quotation deadline (Expiration date). The lines contain the items with quantity and price. Both, header and lines, include the fields Lowest status and Highest status which show the status of the request (“Created”, “Sent”, “Received”, “Accepted”, or “Rejected”) and of the related quotations. Like in the lines of purchase requisitions or purchase orders, a line in the request for quotation either refers to an item number or a procurement category. In the request for quotation form, the column Line type controls whether the line contains an item or a procurement category. Data like delivery date and address in the lines retrieve a default value from the header. The document management (see section 10.5.1) provides the option to add details like data sheets or drawings to the request header or lines. In order to specify the vendors, who receive the request for quotation, switch to the tab Vendor in the header view and insert a line for each vendor.

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3.8.3.2 Sending Requests to Vendors Once you have entered all required vendors, click the button QUOTATION/Process/ Send in the action pane. In the Sending request for quotation dialog that is shown next, click the button Print in the upper toolbar and set the slider Print request for quotation in the print dialog to “Yes” if you want to print the request. Then click the button OK in the prior dialog to post and print the request. In order to view, to which vendors you have sent the request for quotation, you can click the button QUOTATION/Journals/Request for quotation journals in the request for quotation form afterward.

3.8.3.3 Request for Quotation Replies As a prerequisite to enter RFQ replies (vendor bids) in the regular Dynamics 365 web client, the slider Purchaser can edit vendors bid in the procurement parameters (Procurement and sourcing> Setup> Procurement and sourcing parameters, tab Request for quotation) has to be set to “Yes”. The button QUOTATION/Replies/Set RFQ reply defaults in the request for quotation form provides access to a form, in which you can specify the fields which have to be included in a reply (vendor bid). These fields are shown on the RFQ reply sheet, which you can print when sending the request for quotation (there is a corresponding slider in the printing options). The default for the reply field settings is specified in the procurement parameters (button Default request for quotation reply fields in the toolbar of the tab Request for quotation). Once a vendor replies to a request by sending a quotation, open the menu item Procurement and sourcing> Requests for quotations> Requests for quotations follow-up> Request for quotation, select the line which shows the particular RFQ (in the column Request for quotation case) and vendor (in the column Vendor account), and open the reply detail form (use the link in the field Request for quotation case or the button REPLY/Maintain/Edit). Alternatively, you can open the reply detail form with the button QUOTATION/Replies/Manage replies in the request for quotation. In the reply detail form, click the button Edit/Edit RFQ reply to access the RFQ bid. In this form, you can enter the header and line data of the vendor quotation before you click the button Submit to set the reply status to “Received”.

3.8.3.4 Approving and Rejecting Replies If you want to compare the replies (quotations) which you receive from the vendors, click the button QUOTATION/Replies/Compare replies in the request for quotation form to access the Compare request for quotation replies form. In this form, you can select the checkbox in the column Mark and click the button Accept in the action pane to accept a quotation. Alternatively, you can accept a quotation in the reply detail form (click the button REPLY/Process/Accept in this form).

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When you accept a quotation for an RFQ with the Purchase type “Purchase order”, a purchase order is created. If you accept all lines of an RFQ, Dynamics 365 suggests rejecting the other replies for the request. But you can also reject a request with the button REPLY/Process/Reject in the reply detail form. If you want to create a purchase price trade agreement (see section 3.3.3) from a quotation, click the button GENERAL/Trade agreements/Create price agreement journal line in the reply detail form to generate a trade agreement journal (with a journal name specified in the procurement parameters) which you can post subsequently.

3.8.3.5 New in Dynamics 365 Compared to Dynamics AX 7, there are changes in the RFQ reply process.

3.8.4

Case Study Exercise

Exercise 3.17 – Request for Quotation You want to receive vendor quotations for the item of exercise 3.5. For this purpose, enter a request for quotation with this item. The RFQ reply defaults for the request should include the header field Reply valid to and the line fields Quantity and Unit price. Send the request to the vendor of exercise 3.2 and another vendor of your choice. After a while, you receive quotations with quantities and prices of your choice from both vendors. Enter these quotations in the request for quotation replies assigned to the original request. The vendor of exercise 3.2 has submitted the better quotation, which you want to accept. Reject the quotation of the other vendor.

4

Sales and Distribution

The primary responsibility in sales and distribution is to provide customers with goods and services. In order to perform this task, the sales order process includes the order entry, picking, shipping, and invoicing.

4.1

Business Processes in Sales and Distribution

Before we start to go into details, the lines below give an overview of the business processes in sales and distribution.

4.1.1

Basic Approach

As a prerequisite for order processing, correct master data are required, particularly the customer and product data. For services and non-inventoried items, it is possible to use sales categories instead of products.

4.1.1.1 Master Data and Transactions in Sales Customers and products are master data, which are created once and only occasionally updated later. In the course of sales order processing, default values from customer and product records (master data) initialize the respective fields in sales quotations and sales orders (transaction data). You can override these data in the transaction – for example, if the customer requires a different delivery address in a particular sales order. If such an update should also apply to future orders, you have to modify the customer record accordingly. Since the sales process is mirroring the purchasing process, sales order processing is very similar to purchase order processing. Figure 4-1 shows the primary steps of sales order processing (including required predecessor and successor activities).

Figure 4-1:

Sales order processing in Dynamics 365

4.1.1.2 Sales Quotations If we disregard prior marketing activities, sales order processing starts with a request from a prospect or customer. The sales team then creates a quotation as an © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_4

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answer to this request and sends it to the potential or actual customer. Based on this sales quotation, Dynamics 365 can generate activities for following up on the quotation.

4.1.1.3 Sales Orders If the customer agrees to the proposal and orders the goods or services, you have to create a sales order as the basis for order fulfillment. Like a purchase order, a sales order consists of a header, which contains the common data of the whole order (e.g., customer data), and one or more lines, which contain the ordered items (products or sales categories). Optionally, you can post an order confirmation and send it to the customer electronically or as a printed document. Posting the order confirmation stores the confirmation. For this reason, you can always view the order confirmation with its original content, no matter if the sales order has been modified later on. In order to manage long-term contracts (blanket orders), you can use sales agreements in Dynamics 365. If you want to issue a shipment related to the blanket order later, create a release order with a partial quantity of the sales agreement. Release orders are regular sales orders which are assigned to the agreement.

4.1.1.4 Delivery Management Depending on the settings of the item, master planning determines the material supply (through purchasing or production) and makes sure that you can ship the sales order in time. Before shipping the item, you can print a picking list to prepare delivery. Once you have finished the internal shipment procedure, you can post the packing slip. If picking lists are not needed, you can post a packing slip without a prior picking list.

4.1.1.5 Invoicing Once the packing slip has been posted, you can post an invoice for the sales order. If you do not require a separate packing slip, you can also post the invoice without a prior packing slip. In this case, the invoice is posting the physical and the financial transactions in parallel. If you want to sell services or non-inventoried items, you can process a regular sales order (enter order lines with sales categories or service items). Alternatively, you can use a free text invoice in case you just need an invoice and no other sales document. In the lines of a free text invoice, you have to enter ledger accounts instead of products or sales categories.

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4.1.1.6 Customer Payments Before the due date, the customer has to pay the invoice with or without cash discount deduction. Section 9.3.3 contains a description on how to post the customer payment and to settle the invoice in the customer transactions. If the customer does not pay in time, you can create payment reminders in Dynamics 365.

4.1.1.7 Ledger Integration and Voucher Principle Based on the deep integration of finance with the business processes in all areas of Dynamics 365, the inventory and customer transactions in sales are posted to ledger accounts as specified in the setup (see section 9.4). In order to keep track of the whole business process, Dynamics 365 comprehensively applies the voucher principle which means that you have to register a document (voucher) before posting the transaction. The transactions in sales order processing are similar to the respective purchasing transactions. For your guidance, the Figure 4-2 below shows a comparison of purchase and sales documents in order processing.

Figure 4-2:

Comparison of purchasing and sales documents

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At a Glance: Sales Order Processing

The following example demonstrates the main steps in sales order processing. It starts with creating the order in the workspace Sales order processing and inquiry and shows how to post all transactions directly in the sales order form. Alternatively, create the order from the customer form or in the sales order form. In the workspace Sales order processing and inquiry, click the button New/Sales order in the action pane to create an order. The Create sales order dialog is shown next, in which you select a customer in the field Customer account (you can trigger the search in this field by typing the first characters of the customer name). Once you close the dialog with the button OK, Dynamics 365 creates an order header with default data (e.g., for the currency) from the customer. The sales order detail form is shown in the lines view then. If you are in read mode, click the button Edit, or press the F2 key, to switch to the edit mode. Then enter the first order line with the item number (or sales category), quantity, and price on the tab Sales order lines. When you select the item, Dynamics 365 initializes the quantity, the price, and other fields with default values from the item. If you want to enter another line, press the Down Arrow, or click the button Add line in the toolbar. The button Header (or Lines) below the action pane provides the option to switch between the header view (see Figure 4-3) and the lines view.

Figure 4-3:

Entering header data in the sales order header view

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If you want to print the order confirmation, click the button SELL/Generate/Confirm sales order in the action pane. In the dialog that is shown next, make sure that both sliders, Posting and Print confirmation, on the tab Parameters are set to “Yes”. Optionally, click the button Printer setup to select a printer (see section 2.2.1). Then post the packing slip with the button PICK AND PACK/Generate/Post packing slip in the action pane of the sales order form. In the posting dialog, select the option “All” in the field Quantity to ship the entire quantity and make sure that the sliders Posting and Print packing slip are set to “Yes”. Then click the button OK to post and print the packing slip. Packing slip posting reduces the physical quantity in inventory and sets the order status to “Delivered”.

Figure 4-4:

Posting the packing slip in the sales order

Posting the sales invoice with the button INVOICE/Generate/Invoice in the sales order form is similar to packing slip posting. In order to invoice only shipped items, make sure to select the option “Packing slip” in the lookup field Quantity of the posting dialog. If you select the option “All”, invoice posting in parallel ships the deliver remainder quantity (open quantity, which is not included in prior packing slips). Invoice posting generates an open customer transaction which needs to be paid and updates the order status to “Invoiced”. Notes: If an order contains only one line, you might need to refresh the form with the shortcut Shift+F5 to activate the button for the order confirmation. And depending on the requirements, you can skip transactions in the process described above. The most streamlined process is to post the invoice immediately after entering the sales order (select “All” in the field Quantity of the Posting invoice dialog in this case).

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Customer Management

Business partners, who receive goods or services, have to be entered as customers in Dynamics 365. As long as the business partner only receives quotations, you can also use a prospect record. Customer records in sales are similar to vendor records in purchasing, and both list pages and detail forms contain similar features. Examples of these features are onetime customers, payment terms, posting profiles, and the global address book.

4.2.1

Core Data in the Customer Records

In order to edit existing or to create new customers, open the customer list page in the sales module (Sales and marketing> Customers> All customers) or in the accounts receivable module (Accounts receivable> Customers> All customers). According to the general structure of list pages, the customer page is showing a list of all customers. If you want to view the details of a customer, click the link in the field Account. Apart from the menu items, the workspace Sales order processing and inquiry also provides access to the customer detail form (there is the list Find customer in the center pane).

4.2.1.1 Create Customer Dialog If you want to create a new customer in the customer page, click the button New in the action pane or press the shortcut Alt+N. In the Create customer dialog, which contains all core fields of the customer record, select the appropriate Type (“Person” or “Organization”) first. The field Name in the dialog is a lookup field in which you can enter a new name or – if the customer is already a party in the global address book – select an existing party. Depending on settings in the corresponding number sequence, the unique customer number in the field Customer account is assigned automatically or has to be entered manually. Customer records are linked to the global address book in the same way as vendor records, which is why features like the duplicate check work as described for vendors (see section 3.2.1). If you want to create a sales order immediately when creating the customer, click the button Save and open/Sales order in the dialog.

4.2.1.2 Customer Detail Form The customer detail form contains numerous fields, which are used as default values for sales orders. Like the vendor group in the vendor record, the Customer group in the customer record is a core setting which controls ledger integration via the customer posting profiles (compare section 3.2.3). Further important fields include the Sales tax group (VAT group, default from the customer group), the Delivery terms, and the Mode of delivery on the tab Invoice and delivery, the Currency on the tab Sales demographics, the Terms of payment on the tab Payment defaults, and

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settings for blocking (lookup field Invoice and delivery on hold on the tab Credit and collections).

Figure 4-5:

Editing a customer in the customer detail form

Since the structure and the content of the fields in the customer record are very similar to the vendor record (including the vendor approval), the description below only covers the differences and elements, which primarily refer to customer records and which have not been explained for vendor records.

4.2.1.3 Invoice Account Sometimes it is necessary to send an invoice to a customer, who is not the order customer – for example if the head office of an affiliated group should receive the invoice for subsidiaries. In order to comply with this situation, select the customer number of the invoice customer in the field Invoice account on the tab Invoice and delivery. The invoice customer in the customer record – or, if empty, the customer number itself – is the default for the field Invoice account in related sales order headers, but you can override the invoice account in the sales order. The customer number in the open customer transaction is the invoice account of the sales order. Unless chosen differently in the lookup field Invoice address on the tab Invoice and delivery in the customer record, the customer name and address on the printed invoice show the invoice customer.

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4.2.1.4 Alternative Addresses and Global Address Book Integration The invoice account in the customer form refers to another customer, who needs to be entered as a separate customer record. If you only need several postal addresses for one customer, you can enter them on the tab Addresses of the customer form.

Figure 4-6:

Editing a customer delivery address in the Edit address dialog

Like the postal addresses for vendors (see section 3.2.1), customer addresses are shared with the related party in the global address book. In order to enter a new customer address, click the button Add in the toolbar of the tab Addresses. In the New address dialog that is shown next, enter the address name and select one or more purposes. If the address is the primary customer address, make sure that the slider Primary is set to “Yes” and the slider Private to “No”. If you enter an address with the purpose “Invoice”, invoices for the customer show this address instead of the primary address. An address with the purpose “Delivery” is the default for the delivery address in sales orders. If you want to ship to an address, which is different from the delivery address and from the primary address (which is the default if there is no particular delivery address), select one of the other customer addresses or enter a completely new address in the sales order. You can edit the detail data of an address with the button More options/Advanced in the toolbar of the tab Addresses in the customer form. If a customer has multiple

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addresses with the same purpose and you want to specify a default value for a purpose, click the button More options/Set defaults in the toolbar of the tab Addresses in the customer form.

4.2.1.5 Print Management Base settings for printing options like the destination (printer), the number of copies, or the footer text are available in the accounts receivable print management setup (Accounts receivable> Setup> Forms> Form setup, button Print management in the toolbar of the tab General). You can override these settings in the print management of the customer (access with the button GENERAL/Set up/Print management in the customer form). Select the respective original or copy document in the left pane of the print management form first, and then select the option Override in the context menu (which you can open with a right-hand click) before you enter the individual settings. Customer print management settings are transferred to the sales orders. In the sales orders, you can override the settings again. The print management settings (e.g., a specified printer) are used for document printing if the slider Use print management destination in the particular posting dialog is set to “Yes” (compare section 3.4.5).

4.2.1.6 Credit Limit In order to reduce the risk of unpaid invoices, many companies apply credit limits to customers. For this purpose, the accounts receivable parameters (Accounts receivable> Setup> Account receivable parameters, tab Credit rating) contain settings which control the usage of credit limits. Depending on these settings, the credit limit check includes only unpaid invoices, or also open packing slips, or additionally open orders, and shows a warning or an error message. The tab Credit and collections in the customer form contains the field Credit limit with the credit limit amount of the customer. If the slider Mandatory credit limit is set to “Yes”, the credit limit amount is always used. Otherwise, a credit limit amount of zero means unlimited credit. When you enter a sales order or post a transaction, Dynamics 365 executes a check whether the customer exceeds the credit limit and displays an error message (which prevents posting) or a warning.

4.2.1.7 New in Dynamics 365 Compared to Dynamics AX 2012, the shipping carrier interface is deprecated.

4.2.2

Case Study Exercise

Exercise 4.1 – Customer Record A new domestic customer wants to place an order. Create a record for this customer with a name (starting with your user ID) and a primary address of your

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choice. Select the payment terms and the cash discount of exercise 3.1, and an appropriate customer group and sales tax group for domestic customers. The customer wants you to ship ordered goods to a separate delivery address. Enter a domestic delivery address of your choice for this purpose, which should be the default for orders of this customer.

4.3

Product Management in Sales

Apart from customer records (which are the main data source for sales order headers), products and sales categories (which are the main data source for order lines) are the second core area of master data for sales operations. Product and released product records are required for inventoried items. For intangible items (e.g., services, fees, licenses), you can either use items (with the product type “Service” or a specific item model group) or sales categories. This section primarily contains an explanation of the product data which are necessary for sales and distribution. You can find a general description of product management in Dynamics 365 in section 7.2 of this book.

4.3.1

Product Data and Sales Categories

When entering a sales order line, you have to select an item number or a sales category to identify the item or service which you are selling.

4.3.1.1 Sales Categories A product category (see section 3.3.1) is a group of similar products or services. Sales categories are product categories which belong to the hierarchy with the type “Sales category hierarchy”. You can manage sales-related settings of these product categories in the sales category form (Sales and marketing> Setup> Categories> Sales categories). In this form, the item sales tax group on the tab Item sales tax groups is one of the core settings.

4.3.1.2 Entering New Products The product management in Dynamics 365 has got two levels: The shared products (Product information management> Products> All products and product masters), which contain the common data of the items in all companies, and the released products (Product information management> Products> Released products), which contain the company-specific data. In order to create a new product, open the shared product form and click the button New to insert a record. Once you have completed the shared product, click the button Release products in the action pane of the shared product to create the released product. In the released product, you have to enter at least the item group, the item model group, the dimension groups (if not specified in the shared

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product) and the unit of measure for purchasing, sales, and inventory (a default unit is specified on the tab General in the inventory parameters). As an alternative to creating and releasing a shared product, you can create a released product with the button New directly in the released product form. The New released product dialog, which includes data for the shared and for the released product, then creates the shared product and the released product in parallel.

4.3.1.3 Sales Related Data Core sales data, including the Item sales tax group (which determines whether regular sales tax / VAT or a reduced rate applies), are available on the tab Sell of the released product form. Settings for order quantities and lot sizes are specified in the default order settings, which you can access with the button MANAGE INVENTORY/Order settings/Default order settings in the released product. Apart from sales-related data on the tab Sales order, the default order settings contain further tabs with data for purchasing and inventory. A checkmark in the checkbox Stopped on the tab Sales order blocks the item for sales transactions. In the default order settings, the record with a blank Site and the Rank “0” determines the settings at the company level. If you want to specify order settings at the level of sites, insert an additional record in which you enter the Site in the respective field. In order to override the default order settings at the company level with default order settings at the level of sites, set the applicable slider Override default settings in the site-specific order settings to “Yes”.

4.3.2

Sales Price and Discount Setup

Apart from the base sales price, which you can enter in the released product, there are the trade agreements that cover price lists and discount agreements.

4.3.2.1 Base Sales Price The base sales price is used in sales orders with no applicable trade agreement for the respective customer and item. You can edit the base sales price on the tab Sell in the released product form. It is possible to enable an automatic update of this base price which is based on the purchase price or the cost price. The field group Price update on the tab Sell in the released product contains the settings for this price calculation. The first setting in this field group is the lookup field Sales price model which determines if the price calculation refers to the field Contribution ratio or to the field Charges percentage. The Sales price model “None” means that there is no automatic calculation of the base sales price. The lookup field Base price determines the basis for the price calculation and includes two options:  Purchase price – Sales price based on the base purchase price (tab Purchase).  Cost – Sales price based on the base cost price (tab Manage costs).

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The other settings related to the base sales price (including the price quantity and price charges) are similar to the base purchase price settings (see section 3.3.3). In addition to the base sales price on the tab Sell in the released product form, you can enter base prices at the level of sites in the item price form. In order to access the item price form, click the button MANAGE COSTS/Set up/Item price in the released product. For manufactured items, you can run a sales price calculation that is based on the bill of materials and the route (see section 7.3.3).

4.3.2.2 Discount Groups Apart from the Base sales price, the tab Sell in the released product form contains item discount groups for line discount and multiline discount. The discount groups are used in trade agreements. In the discount calculation, the line discount is calculated on the basis of the individual order line whereas the calculation of multiline discounts includes all order lines with the same discount group (relevant, if the discount is depending on the quantity). Total discounts (invoice discounts), which are specified at the order header level, are another kind of discounts. In the released product form, you can exclude particular products from the basis of total discount calculation by setting the slider Total discount on the tab Sell to “No”. In order to group customers for pricing purposes, the tab Sales order defaults in the customer form contains the price group and the discount groups (line discount, multiline discount).

4.3.2.3 Structure of Trade Agreements Trade agreements in sales determine prices and discounts as a function of customers and released products. In Dynamics 365, there are the following types of trade agreements:    

Sales prices Line discounts Multiline discounts Total discounts (Invoice discounts)

Section 3.3.3 contains a description of price trade agreements on the example of purchase prices. In addition to the options available in purchasing, the sales trade agreements include the option to apply a Generic currency and an Exchange rate type which is specified in the accounts receivable parameters (Accounts receivable> Setup> Accounts receivable parameters, tab Prices/Generic currency and smart rounding). If a generic currency is specified, prices in trade agreements in this currency (if the slider Include in generic currency in the agreement line is set to “Yes”) are automatically converted to other currencies if there is no other applicable trade agreement when entering a sales order line.

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In the order management, you can assign discounts to the header and to the lines:  Line and multiline discounts – Assigned to order lines.  Total discounts – Assigned to order headers. Discount and price trade agreements can be specified at different pricing levels. You can, for example, enter a line discount agreement for an individual customer, for a customer price group, or for all customers. In addition to the customer specification, you can refer to the item specification (individual item, item discount group, or all items) in a line discount agreement. Table 4-1 shows the options for a line discount agreement with regard to the customer and the item specification. Table 4-1:

Discount specification levels for line discounts Item number

Item discount group

All items

Customer number

X

X

X

Customer discount group

X

X

X

All customers

X

X

X

As a result, you can enter a line discount agreement for a particular item and a particular customer, and another agreement for an item discount group and all customers. For multiline discounts, the same principle is true, except that you can’t enter a multiline discount at the level of an item number. In trade agreements for prices and in trade agreements for total discounts, the item specification is limited to one level: Prices are specified per item, which restricts the item specification level to “Item number”, and total discounts refer to the order header level, which restricts the item specification level to “All items”.

4.3.2.4 Managing Line Discount Agreements In order to view sales line discounts, you can access the line discounts from different menu items (depending on the basis of the discount):  For an item (including the line discount group of the item) – In the released product form, click the button SELL/View/Line discount.  For a customer (including the line discount group of the customer) – In the customer form, click the button SELL/Trade agreements/Discounts/Line discount.  For an item discount group – In the item discount group form (Sales and marketing> Prices and discounts> Item discount groups), make sure that the option “Line discount group” is selected in the lookup field Show and click the button TRADE AGREEMENTS/Sales/View line discount.  For a customer discount group – In the customer price/discount group form (Sales and marketing> Prices and discounts> Customer price/discount groups), select the option “Line discount group” in the lookup field Show and click the button TRADE AGREEMENTS/Sales/View line discount.

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In discount agreements, the column Discount (or Amount in transaction currency) specifies a discount amount (used in case the discount is an amount and not a percentage). The Discount percentage 1 is shown in a separate column and in the footer pane of the form. The Discount percentage 2 is only shown in the footer pane. If both, the discount percentage-1 and the percentage-2, are specified in a trade agreement, the multiplied total of these discounts is transferred to the field Discount percentage in applicable order lines. If a trade agreement contains, for example, a percentage-1 of 10 % and a percentage-2 of 10 %, the discount percentage in the order line is 19 %. Another important setting for discount calculation is the column Find next on the right in the trade agreements. The checkbox in this column should only be selected for discounts, which apply in addition to discounts entered at another level. In the example of the trade agreements shown in Figure 4-7, the discount in a sales order line with a quantity of 100 units (or more) would be 17 percent, if the checkbox Find next was marked for the 12 percent discount line and if the item is assigned to the item discount group with a discount of 5 percent in the other agreement line.

Figure 4-7:

Viewing the line discounts for a customer discount group

Like registering a new price agreement (see section 3.3.3), registering a new line discount agreement requires to enter and to post a trade agreement journal (Sales and marketing> Prices and discounts> Trade agreement journals). After creating a journal with the button New in the agreement journal header, click the button Lines in the action pane to access the journal lines. When you enter a sales line discount in an agreement journal line, make sure to select the option “Line discount (Sales)” in the column Relation. Line discount agreements are similar to price agreements and include the following fields:

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 Period of validity – From date / To date, related to order entry or delivery date (controlled by the Date type on the tab Prices/Prices in the accounts receivable parameters).  Quantity – Columns From and To (for quantity-dependent discounts).  Unit of measure – Column Unit.  Currency – Currency (for a discount specified as discount amount).  Customer specification – Columns Party code type and Account selection (Individual customer, customer discount group, or all customers).  Item specification – Columns Product code type and Item relation (Individual item, item discount group, or all items). When you enter line discounts, you have to keep in mind that discount percentages are shown in the footer pane of the journal lines. If entered, a discount in the column Amount in currency is a discount amount. If you want to enter line discounts at inventory dimension level (e.g., per site or color) and the appropriate dimension column is not shown, click the button Inventory/Display dimensions in the toolbar of the tab Overview of the journal lines and select the appropriate dimension. As a prerequisite, the dimension group of the item has to include the selected dimension in the price search. Once you have entered the line discounts in the agreement journal completely, you can click the button Post to activate the agreement. If you want to update or to delete an active trade agreement, open the respective trade agreement inquiry (e.g., the line discount inquiry that you access with the button SELL/View/Line discount in the released product form), select the agreement, and click the button Edit selected lines. Like when updating purchase prices (see section 3.3.3), the update or delete operation is posted through a new journal which is linked to the selected agreement.

4.3.2.5 Managing Multiline Discounts and Total Discounts Whereas the basis for the calculation of line discounts is the individual order line, the basis for the calculation of multiline discounts are all lines within a sales order, in which the items are assigned to the same multiline discount group. You can use multiline discounts if you want to grant a discount based on the total quantity of several similar items (e.g., for a discount on all items of a group “Accessories”). Multiline discount administration works similar to line discount administration. Unlike line discounts, total discounts (invoice discounts) do not refer to items or item groups. Total discounts refer to a complete invoice and provide the option to enter a discount based on the invoice total.

4.3.2.6 Required Setup for Prices and Discounts As a prerequisite for trade agreements, you have to set up at least one trade agreement journal name (Sales and marketing> Setup> Prices and discounts> Trade

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agreement journal names). Trade agreement journal names are a common setup for sales and for purchasing. If you want to use trade agreements at the level of groups, you have to set up the required price and discount groups and assign them to the customers and/or released products. Trade agreements are only used in the price and discount calculation, if the appropriate combination is selected in the price/discount activation (Sales and marketing> Setup> Prices and discounts> Activate price/discount). Within the activated elements, discount calculation searches from the specific to the general level – first the customer and item number level, then the group level, and finally the general discount level (“All”). Depending on the setting of the checkbox Find next in the applicable trade agreements, only one discount or the total of several applicable discounts is used in the respective order lines. If line discount and multiline discount apply to a particular sales order line in parallel, a setting in the accounts receivable parameters (field Discount on the tab Prices/Prices) controls how to calculate the total of line and multiline discount.

4.3.2.7 Ledger Integration for Discounts Discounts have an impact on the financial transactions. With regard to ledger transactions and sales revenue calculation, you have to distinguish between line and multiline discounts on the one hand, and total discounts on the other hand. Line and multiline discounts are included in the item revenue calculation – they reduce the revenue and the gross margin. Settings for the ledger integration of line and multiline discounts control, if the discount is posted to a separate account or if it reduces the amount that is posted to the revenue account. Dynamics 365 is posting to a separate account, if there is an applicable main account for discounts in the posting setup (Cost management> Ledger integration policies setup> Posting, tab Sales order, option Discount). Unlike line and multiline discounts, total discounts are always posted to a separate account and do not reduce the revenue at the level of items. In addition, it is not possible to post total discounts to main accounts that depend on the customer. The main account for total discount transactions is specified in the accounts for automatic transaction (General ledger> Posting setup> Accounts for automatic transactions, line with the posting type “Customer invoice discount”).

4.3.3

Case Study Exercises

Exercise 4.2 – Sales Categories Your company offers installation services to the customers. For this purpose, enter a new category “##-installation” (## = your user ID) in the sales category hierarchy. The sales category should refer to the standard tax rate.

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Exercise 4.3 – Price List Your company requires an additional price list for new sales markets. Enter a new customer price group P-## (## = your user ID) for this price list and attach it to the customer of exercise 4.1. The new price list shows a price of USD 90 for the item of exercise 3.5, which is valid from now on. Enter and post this price in a trade agreement journal. Then check if the price is shown correctly for the customer. Exercise 4.4 – Line Discount You agree to a line discount of 10 percent on all items for the customer of exercise 4.1. Enter and post a trade agreement with this discount, which only applies to this customer. Which setting is required to use the discount in sales orders?

4.4

Sales Order Management

The first document generated in sales order processing often is a sales quotation, which you can send to a prospect or customer in reply to a request for quotation. Once the customer orders goods or services, enter an appropriate sales order. With regard to the functionality and the structure of forms and list pages, sales orders work similar to purchase orders. For this reason, the focus in this section is on the subjects in sales, which are different from purchasing.

4.4.1

Basics of Sales Order Processing

Unlike purchase orders, which are primarily based on material requirements which are known within Dynamics 365, sales orders in most cases originate from sources outside the application. Apart from manually entering a sales order, there are only a few other options to generate a sales order from within Dynamics 365. These possible options to generate a sales order include:     

Sales quotations – After acceptance, quotations are transferred to orders. Sales agreements – Blanket orders are the basis for release orders. Data import/export framework – Exchanging data with other applications. Intercompany functionality – From purchase orders in another legal entity. Project module – Create project sales orders or item requirements.

In Dynamics 365, blanket orders are covered by sales agreements (Sales and marketing> Sales agreements> Sales agreements), which do not only contain contracts at the level of product number and quantity, but also at the level of the total sales amount for a product, or at the level of the total sales volume for a customer. In order to ship and invoice deliveries with reference to a sales agreement, create release orders (regular sales orders which are linked to the sales agreement). In general, sales agreements work similar to purchase agreements (see section 3.8.1). Once you have entered a new sales order – either manually or transferring a prior document like the sales agreement – you can post and print the order confirmation.

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The further proceeding is depending on the requirements and the related settings on how and which transactions should be registered in inventory and in sales.

Figure 4-8:

Sales order processing in Dynamics 365

In the warehouse, there are several options to process a sales order (see Figure 4-8):    

Packing slip – Immediately post the packing slip. Picking list – Post a picking list before posting the packing slip. Picking list registration – Confirm the picking list before packing slip posting. Advanced warehouse management – See section 8.1.

Another way for the warehouse process is to execute picking in the pick form (accessed from the sales order line). Usually, you work in this way if you have to register serial numbers or batch numbers, but do not process picking as a separate process in the warehouse. After posting the packing slip, you can post the invoice. If no packing slip is required, you can post the invoice immediately after entering the order.

4.4.2

Sales Quotations

In a sales quotation, the business partner does not need to be a customer, it can also be a prospect. But since sales orders require a customer, you have to convert the prospect to a customer before you can transfer an accepted quotation to an order.

4.4.2.1 Managing Prospects Prospects are parties – companies or persons – in sales, who are not customers yet. It is not possible to post transactions, which have an impact on the general ledger, for prospects – this is only possible for customers. You can use prospects in CRM activities like mailings and marketing campaigns, and in sales quotations. If you want to create a new prospect, open the menu item Sales and marketing> Relationships> Prospect> All prospects and click the button New in the action pane.

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The Create prospect dialog works similar to the Create customer dialog (see section 4.2.1), including the integration of the global address book. In the prospect detail form, you can update core data like the sales tax group (VAT group) and the customer group of the new prospect. Some default data like the prospect type (Type ID on the tab General) of a new prospect derive from the sales and marketing parameters (tab Prospects). If you want to convert a prospect to a customer, click the button GENERAL/Convert/ Convert to customer in the prospect form. Depending on the setting in the prospect type (Sales and marketing> Setup> Prospects> Relation types) of the prospect, the prospect is deleted automatically after converting.

4.4.2.2 Processing Sales Quotations In order to create a new sales quotation, open the quotation form (Sales and marketing> Sales quotations> All quotations) and click the button New in the action pane. Alternatively, you can create a quotation with the button SELL/New/Sales quotation in the customer form or in the prospect form.

Figure 4-9:

Creating a new quotation for a prospect

If you create a quotation in the quotation form, the Create quotation dialog is shown in which you have to select the Account type (“Customer” or “Prospect”). Depending on the selected account type, enter a customer or a prospect in the respective lookup field. The sales quotation is initialized with default values from the selected customer or prospect then. Once you close the dialog with the button OK, Dynamics 365 creates the quotation header and switches to the quotation detail form in the lines view.

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In the quotation detail form, you can click the button Add line in the toolbar of the tab Lines or simply click on the first line in the grid to create a line. Then select an item number (or a sales category) and enter other line details as required. Once you have completed the quotation lines, click the button QUOTATION/ Generate/Send quotation in the action pane to post and print the quotation (similar to an order confirmation in a sales order). Depending on the decision of the customer or prospect, you can confirm the quotation with the button FOLLOW UP/Generate/ Confirm in the action pane at a later stage (automatically generating a sales order). If the quotation refers to a prospect, you have to convert the prospect to a customer before you can create the sales order. Click the button FOLLOW UP/Modify/Convert to customer in the quotation form for this purpose.

4.4.3

Sales Order Registration

Like in a purchase order, the order type is a core characteristic in a sales order. In a sales order, following order types are possible:     

Sales order – Regular sales order. Journal – Draft or template, without impact on inventory and finance. Subscription – Periodic order, remains open after invoicing. Returned order – Credit note, see section 4.7.1. Item requirements – Representing project demand from the projects module.

It is not possible to enter a sales order with the order type “Item requirements” or “Returned order” manually in the sales order form.

4.4.3.1 Entering a New Sales Order Depending on your personal preferences, you can start from one of the following forms to create or update a sales order manually:  Customer form (Sales and marketing> Customers> All customers)  Sales order processing and inquiry workspace  Sales order form (Sales and marketing> Sales orders> All sales orders) The center pane in the workspace Sales order processing and inquiry, which you can access from the dashboard or from the folder Workspaces in the Sales and marketing menu, includes a list with unconfirmed and a list with delayed orders. With a click on the tile All sales orders in the workspace, you can open the sales order list page with all orders. If you want to create a new order in the workspace, click the button New/Sales order in the action pane. The following steps are the same as if you create an order in the sales order form. In the Create sales order dialog, select a customer in the field Customer account. You can search the customer by typing the first characters of the customer number (or the name), or by explicitly opening the lookup. In the lookup, you can use a grid filter, for example on the column Name. The sales order then accepts various default values from the selected customer, which you can override in the dialog.

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When you click the button OK in the dialog, the sales order header is created, and the order detail form is shown in the lines view.

Figure 4-10:

Entering a sales order line with a sales category

In the sales order detail form, you can click the button Add line in the toolbar of the tab Sales order lines or simply click on the first line in the grid to create a line. Then select an item number (or a sales category) and enter other line details as required. Sales orders work similar to purchase orders for the most part. For this reason, you can refer to section 3.4 and 3.5 on the following topics:      

Layout and features of the order form – See section 3.4.2. Sales tax / VAT – See also section 9.2.6. Delivery schedule – See section 3.4.2. Order cancelation – See section 3.4.4. Partial delivery, underdelivery, and overdelivery – See section 3.5.5. Order status and inquiries – See section 3.5.6 and 3.6.2.

When deleting a sales order, be aware of the following settings in the accounts receivable parameters (Accounts receivable> Setup> Accounts receivable parameters):  Mark order as voided (tab General/Sales setup) – If set to “Yes”, deleted sales orders are shown in the menu item Sales and marketing> Inquiries and reports> History> Voided sales orders.  Delete order line invoiced in total and Delete order after invoicing (tab Updates/Invoice) – If set to “Yes”, orders (order lines) are deleted when posting the invoice (but the related transactions in inventory and finance are still there). Unlike purchase orders, sales orders do not include change management and order approval.

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4.4.3.2 Keyword Search The keyword search is an enhanced search functionality which facilitates the selection of customers, prospects, and products in sales orders. Before you can use the keyword search, the search parameters (Sales and marketing> Setup> Search> Search parameters) have to be set up. In addition, the fields which should be included in the search have to be defined in the search criteria (Sales and marketing> Setup> Search> Define criteria). Click the button Customer (or Product, or Prospect) in the action pane of the Define criteria form to switch between the search fields for the customer search, the product search, or the prospect search. When you create a new sales order, you can select the option “Keyword” in the lookup field Search by of the Create sales order dialog to execute a customer search with the specified search criteria. The keyword search for products is executed in a new a sales order line if you enter a part of the product name, or another search field specified in the criteria, in the item number field and press the Tab key (ignoring the lookup that pops up automatically). As a prerequisite for the search by product name, the search criteria for products have to include the field “ProductName”.

4.4.3.3 Sales Order Holds Sales order holds provide the option to put an order on hold while giving a reason for the hold. As a prerequisite, you have to set up hold codes (Sales and Marketing> Setup> Sales orders> Order hold codes) which indicate the different hold reasons. If you want to set an order hold, click the button SALES ORDER/Functions/Order holds in the sales order form. In the order hold form that is shown next, click the button New and select the respective Hold code. The sales order list page then shows a checkmark in the column Do not process for the order and processing the order is prevented. In order to clear the hold, open the order hold form again – click the button SALES ORDER/Functions/Order holds in the sales order form, or access the menu item Sales and marketing> Sales orders> Open orders> Order holds. In the order hold form, click the button CLEAR HOLD/Clear hold/Clear holds in the action pane. If you want to assign the decision to somebody else, click the button HOLD CHECKOUT/Hold checkout/Override checkout in the order hold form and select the other user in the dialog. The selected user then is the only person who may work on the hold. If you want to transfer the checkout to another user, click the button Override checkout again. The checkout is cleared when you clear the order hold, or manually with the button HOLD CHECKOUT/Hold checkout/Clear checkout.

4.4.3.4 Delivery Address and Invoice Address The delivery address in a sales order is the primary address (or delivery address) of the customer. Like in a purchase order (see section 3.4.2), you can override the

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delivery address on the tab Address in the header view or – at line level – on the sub-tab Address in the order lines. In this context, settings on the tab Summary update/Split based on in the accounts receivable parameters determine whether posted documents (e.g., invoices) are split based on different delivery addresses. Unlike the delivery address, the invoice address is not directly editable in a sales order. If the option “Invoice account” (which is the default value) is selected in the lookup field Invoice address on the tab Invoice and delivery in the customer record, the name and address on the invoice is the Invoice account in the order (on the tab General in the sales order header view). The option the option “Order account” in the field Invoice address of the customer record means that the name and address of the order customer (Customer account in the order) are printed on the invoice. If the customer record of the invoice account contains an address with the purpose “Invoice”, this address is printed on documents.

4.4.3.5 Item Lists If a customer orders the same products frequently, you can use item lists to facilitate the order entry. An item list is a copy template, and the lines of an item list only specify the item number and quantity. In the item list form (Sales and marketing> Setup> Items> Item list), you can click the button New and enter the ID of the Item list and the Description to create a new list. Then click the button Add in the toolbar of the tab Items and add the items (including product dimensions if applicable) with the default order quantity. Alternatively, you can generate customer-specific item lists (based on past sales orders) with the button Item list generation in the action pane. In order to use item lists in a sales order, click the button Sales order line/Copy/From item list in the toolbar of the order lines. In the Item list dialog, select one or more items and optionally override the quantity before you click the button Copy and close. If activated in the accounts receivable parameters (slider Prompt for item list on the tab General/Sales setup), the Item list dialog is automatically shown when you create a sales order.

4.4.3.6 Delivery Date Control An important task in the sales order management is to determine delivery dates. A number of aspects determine the calculation of delivery dates in sales:    

Item availability Order entry deadlines Sales lead time Delivery date control settings

In Dynamics 365, there is a differentiation between the shipping date and the customer receipt date on the one hand, and between the requested and the

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confirmed date on the other hand. As a result, there are four different fields related to the delivery date on the sub-tab Delivery of the sales order line tab Line details. If you want to execute an automatic calculation of the delivery date when entering a sales order line, activate the delivery date control. For this purpose, you can select one of the following options in the lookup field Delivery date control on the tab Shipments/Delivery control of the accounts receivable parameters:    

None – No delivery date control. Sales lead time – Delivery date based on lead time and calendar settings. ATP (“Available to promise”) – Delivery date based on the item availability. ATP + Issue margin – Adds the safety margin for the item (specified in the coverage group) to the delivery date calculated from ATP.  CTP (“Capable to promise”) – Immediately executes local master planning.

If the option “Sales lead time” is selected, the delivery date calculation in sales order lines is only based on the applicable sales lead time and calendars (the slider Working days in the parameters controls whether the calculation only includes working days). The sales lead time determines the number of days that are required internally until shipping the item. A general default for the sales lead time is specified on the tab Shipments of the accounts receivable parameters. The lead time specified there is used as default value for the ship date in the order header. Order lines accept the ship date of the header if the calculated delivery date based on the sales lead time of the item is not after the header ship date. You can specify sales lead times at item level in the default order settings and in trade agreements for sales prices. If the option “ATP” is selected, the delivery date calculation is based on the item availability within the ATP time fence (in the field group ATP of the parameters). Existing planned orders are included in the ATP calculation if the slider ATP incl. planned orders is set to “Yes”. If you enter a quantity in a sales order line which is not available (the calculation includes the on-hand quantity and the transactions within the ATP time fence), the shipping date is the first day after the ATP time fence. In order to avoid that the delivery date is later than the earliest possible date, the ATP time fence should match the lead time of the item for this reason. In order to deal with delayed shipments and receipts, the ATP delayed demand offset time and the ATP delayed supply offset time in the accounts receivable parameters determine whether a transaction, which is scheduled for a past date (but within the ATP backward demand time fence and the ATP backward supply time fence) and has not been posted yet, is included in the calculation. If the option “CTP” is selected, the delivery date calculation immediately executes local master planning in the current dynamic master plan (see section 6.3.1) and creates planned purchase orders and production orders as required. For planned production orders, the delivery date which results from the planned order includes the delivery time for components.

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Delivery control settings in the accounts receivable parameters

In the default order settings of the released product, the lookup field Delivery date control on the tab Sales order provides the option to override the base settings for delivery date control in the accounts receivable parameters. If you want to activate or deactivate delivery control in a specific sales order or sales order line, you can select the appropriate option in the lookup field Delivery date control on the (sub-) tab Delivery of the order header or line. The calculation of the delivery date in an order line includes the following calendar and transport time settings:  General shipping calendar of the company – Organization administration> Organizations> Legal entities, tab Foreign trade and logistics (field Shipping calendar).  Calendar of the shipping warehouse – Inventory management> Setup> Inventory breakdown> Warehouses, tab Master planning (field Calendar).  Receipt calendar of the customer – Sales and marketing> Customers> All customers, field Receipt calendar on the tab Invoice and delivery (on a more detailed level, you can enter a Receipt calendar in the delivery address details, which you can access with the button More options/Advanced on the tab Addresses in the customer form).  Transport calendar per delivery mode and (optionally) warehouse – Sales and marketing> Setup> Distribution> Modes of delivery, button Transport calendar.  Transport days – Inventory management> Setup> Distribution> Transport days (with reference to the delivery mode, shipping warehouse, and receipt address).

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Order entry deadlines (Inventory management> Setup> Distribution> Order entry deadlines) determine the latest time for entering same-day shipments in sales order lines. After the deadline, delivery date calculation starts with the next day. In case delivery date control is activated, Dynamics 365 checks if the item in the order line is available at the entered delivery date. In order to receive a proposal of possible delivery dates, click the link Simulate delivery date below the field Requested receipt date on the (sub-)tab Delivery in the order header or line. If necessary, you can deactivate delivery date control – select the option “None” in the lookup field Delivery date control of the order header or line for this purpose. Once delivery date control is deactivated, you can enter a date which is not included in the regular dates for possible deliveries.

4.4.3.7 Item Availability and Delivery Alternatives As a prerequisite for shipping a product, it must be available in inventory. You can use manual or automatic reservation (see section 7.4.5) to make sure that the required quantity is reserved for the order and it is not possible to consume it anywhere else. Inquiries in the sales order form provide the option to check the item availability. If you only want to view the current inventory quantity of an item with the inventory dimensions of the order line (e.g., site/warehouse), click the button Inventory/View/ On-hand inventory in the toolbar of the order line. If you want to check the item quantity in other warehouses (and further inventory dimensions), click the button Overview in the On-hand dialog. In the on-hand inquiry that is shown next, you can click the button Dimensions to select the displayed inventory dimensions.

Figure 4-12:

Delivery options in the Delivery alternatives dialog

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You can access the net requirements form with the button Product and supply/Net requirements in the toolbar of the sales order lines. In the net requirements, you can start local master planning (see section 6.3) to calculate possible delivery dates. In the explosion form, you can view the item availability at multiple BOM levels. You can access this form with the button Product and supply/Explosion in the toolbar of the order line. In case there are issues to meet the required delivery date of an order line, you can search for other delivery options – warehouses, product variants (for product masters), and modes of delivery – in the Delivery alternatives dialog, which you can open with the button Product and supply/Delivery alternatives in the toolbar of the sales order line. On the tab Delivery alternatives in the Delivery alternatives dialog, select a new mode of delivery or a supply line with a different warehouse or variant before you click the button OK to transfer the selected alternative to the order line. The options in the dialog depend on the selected Delivery date control (sales lead time, ATP, CTP) on the sub-tab Delivery of the order line.

4.4.3.8 New in Dynamics 365 The Delivery alternatives dialog (new in Dynamics AX 7) has been redesigned.

4.4.4

Order Prices and Discounts

Based on the price and discount groups in the order header (copied from the customer), the order lines (copied from the products), and appropriate trade agreements, Dynamics 365 determines the prices and discounts. Apart from the prices and discounts which apply immediately in the sales order, trade allowances which specify a discount depending on the sales volume in a period (see section 4.9.1) have a later impact on the sales revenue and profitability of the order.

4.4.4.1 Sales Price Calculation The sales price in an order line derives from the base price in the released product, or from applicable trade agreements. Trade agreements for prices at customer level take priority over prices at price group level. The price group (which represents a price list in Dynamics 365) of a customer is specified in the field Price on the tab Sales order defaults of the customer form. When you enter a sales order, the price group of the customer is the default for the price group on the tab Price and discount in the sales order header view. If required, you can change the price group in the sales order. In the sales order lines, you can override the calculated sales price and enter a new price manually. If you enter a sales price or a discount manually and modify data in fields of the order line which are among the basis of price calculation afterward (e.g., the quantity), Dynamics 365 may override the manual price and discount with the applicable trade agreement. Depending on accounts receivable parameters settings

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(source “Manual entry” in the list on the tab Prices/Trade agreement evaluation), a confirmation dialog is shown before overriding the manual price or discount. If the margin percentage (based on the sales amount and the cost price) is too low, a margin alert icon is shown in the column Margin alert of the order lines next to the Estimated margin %. As a prerequisite, margin alerts have to be enabled on the tab Margin alerts in the accounts receivable parameters (together with settings for the acceptable and the questionable margin).

4.4.4.2 Discount Calculation Sales orders accept the discounts from the applicable trade agreements for total discounts, multiline discounts, or line discounts as the default value. If you want to change a discount group in the order header, select the appropriate group on the tab Price and discount of the sales order header. Since the total discount is a discount at the header level, the order header contains the discount group and the discount percentage for the total discount.

Figure 4-13:

Price and discount groups in the sales order header

The percentage of a line discount is shown in a separate column in the sales order lines. In addition, the line discount – and the multiline discount – is shown on the sub-tab Price and discount in the order line. Apart from the percentage fields, there are fields for the line discount amount and the multiline discount amount. Be aware not to confuse percentage and amount fields.

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The line discount for an order line is calculated whenever you save the line. Unlike the line discount calculation, the calculation of the multiline discount and the total discount needs to be started manually with the button SELL/Calculate/Multiline discount or SELL/Calculate/Total discount in the sales order form. For the total discount, you can skip the manual calculation if the slider Calculate total discount on posting on the tab Prices/Total discounts of the accounts receivable parameters is set to “Yes”. In this case, the total discount is calculated whenever you print or post an order. If price details are enabled in the accounts receivable parameters (slider Enable price details on the tab Prices/Price details), you can click the button Sales order line/Price details in the toolbar of the sales order line to view extended price and discount information.

4.4.5

Surcharge Management

Charges in sales orders and purchase orders provide the option to cover expenses, which are not included in the price that is shown in the order lines – for example, fees for freight and insurance. You can enter charges manually at header level and at line level in a sales order or a purchase order. In addition, there are charges which automatically apply when entering an order header or line. Standard documents like the order confirmation only print the total charges amount, no matter if the applicable charges refer to the header or to a line.

4.4.5.1 Charges Codes As a prerequisite for the use of charges in orders, you have to set up the required charges codes. Charges codes in sales and in purchasing are independent of each other. For sales charges, use the form Accounts receivable> Charges setup> Charges code, and for purchasing charges the form Accounts payable> Charges setup> Charges code. When you create a new charges code, enter the charges code ID, the description, and the item sales tax group (if applicable) before you switch to the tab Posting. On this tab, you have to specify appropriate ledger integration settings. For sales charges, select the Debit/Type “Customer/Vendor” and the Credit/Type “Ledger account” (and a related revenue account in the field Account) if you want to add the charges on top of the item sales amount. The charges amount is printed separately on documents (e.g., invoices). For purchasing charges, which are shown separately on the vendor invoice, select the option “Customer/Vendor” in the Credit/Type. In the field Debit/Type, select the option “Ledger account” (if you want to post the charges to a separate ledger account) or “Item” (if you want to include the charges amount in the inventory value of the item).

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Managing charges codes for sales

In addition to charges with the Debit/Type (or Credit/Type) “Customer/Vendor”, which are shown separately on documents, it is also possible to set up charges codes which generate only internal transactions in finance. The codes for these charges only include the types “Ledger account” or “Item” in the Debit and the Credit transaction.

4.4.5.2 Manual Charges If you want to enter surcharges in a sales order or in a purchase order, open the form Maintain charges. At header level, you can access the Maintain charges form of a sales order with the button SELL/Charges/Charges in the order form. In purchase orders, click the button PURCHASE/Charges/Maintain charges. In order to enter line charges in a sales order line or a purchase order line, click the button Financials/Maintain charges in the toolbar of the order lines. In the Maintain charges form, select the charges code first. Then select in the column Category, whether the charge is a fixed total amount, an amount per sales unit, or a percentage of the line amount.

4.4.5.3 Auto Charges If you want to apply charges to sales orders automatically, set up automatic charges (Accounts receivable> Charges setup> Auto charges). Auto charges are default values for the charges transactions in orders, which you can override in the order. In the filter pane on the left of the auto-charges form, select the applicable option in the lookup field Level first. This field controls whether the charges are specified at order header or at order line level.

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Figure 4-15:

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Managing auto charges

In the right pane, the settings at the top determine the customers, the items, and the modes of delivery to which the charges apply. You can enter line charges with reference to the customer (customer number, customer charge group, or all), the item (item number, item charge group, or all), and the mode of delivery (mode of delivery, delivery charges group, or all). For header charges, the item selection is fixed to “All”. In order to specify the calculation details for an auto charge, switch to the tab Lines and select the Category before you enter the Charges value. The category determines if the charge is a fixed amount, or an amount per sales unit, or a percentage of the line amount. As a prerequisite for the use of auto charges in sales orders, the sliders Find auto charges for header or Find auto charges for line on the tab Prices/Prices of the accounts receivable parameters have to be set to “Yes”. If you want to maintain auto charges at group level, set up the Customer charge groups, Item charge groups, or Delivery charges groups which you want to use and assign them in the customer form, the released product form, or the modes of delivery form (similar to the price/discount groups for trade agreements). For purchasing, the form Procurement and sourcing> Setup> Charges> Automatic charges and the procurement parameters contain similar settings.

4.4.6

Sales Order Confirmations

Printing an order confirmation requires to post it, which saves the document unchangeable and separate from the actual sales order. Within Dynamics 365, it is the evidence of the document which has been sent to the customer. Like purchase order confirmations, sales order confirmations do not create transactions in inventory or finance.

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4.4.6.1 Posting Dialog for Sales Order Confirmations In order to generate an order confirmation, click the button SELL/Generate/ Confirmation (or SELL/Generate/Confirm sales order) in the sales order form. The dialog for the sales order confirmation is similar to the posting dialogs in purchasing (see section 3.4.5). Like in the Confirm purchase order dialog, you can – once you have set the slider Print confirmation to “Yes” – manually select the printer (click the button Printer setup) or use the printer specified in the print management setup (set the slider Use print management destination to “Yes” for this purpose). If you want to post and print the confirmation, make sure that both sliders, Posting and Print confirmation, in the posting dialog are set to “Yes” before you click the button OK. Apart from the sales order form, further options for posting the order confirmation include the workspace Sales order processing and inquiry (there is the button Confirm in the toolbar of the list Unconfirmed in the center pane) and the summary update in the menu (Sales and marketing> Sales orders> Order confirmation> Confirm sales order). If you access the posting dialog from the menu, be aware that you have to enter a filter (click the button Select to open the filter dialog).

4.4.6.2 Order Confirmation Inquiry After posting an order confirmation in the sales order, the posted document is stored separately. Later amendments of the order have no impact on the posted document. If you want to view a posted order confirmation, click the button SELL/Journals/ Sales order confirmation in the sales order form, or open the menu item Sales and marketing> Sales orders> Order confirmation> Sales order confirmations.

4.4.7

Case Study Exercises

Exercise 4.5 – Sales Order The customer of exercise 4.1 orders 20 units of the item of exercise 3.5. Enter this sales order in the customer form. Which quantity and which price are shown as default, where do they come from? Switch to the header view of the sales order and review the delivery address and the price group afterward. Exercise 4.6 – Surcharges Your company wants to invoice a handling fee to customers. Create an appropriate charges code C-## (## = your user ID) with the standard tax rate, the posting type “Customer revenue”, and an appropriate revenue account for credit posting. In the header of the sales order of exercise 4.5, add this new handling fee with an amount of USD 10 as a fixed charge to the customer.

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Exercise 4.7 – Order Confirmation Post the order confirmation for the order of exercise 4.5 in the workspace Sales order processing and inquiry and print it as a print preview. Check the amount in the order line. In the order confirmation, where do you find the charges?

4.5

Delivery Management

Delivery management includes all activities in the process of picking and shipping the ordered items. Picking, as preparation for shipping, is the internal process of collecting items within the warehouse.

4.5.1

Basics of Picking and Shipping

In order to prepare picking and shipping, you have to check upcoming deliveries continuously. For this purpose, the workspace Sales order processing and inquiry shows delayed orders and orders with delivery date changes in lists in the center pane. Apart from the workspace, there are particular forms which are designed to review pending shipments:  Sales and marketing> Sales orders> Open orders> Backorder lines  Sales and marketing> Sales orders> Open orders> Open sales order lines In addition, the pending shipments are shown in the posting dialog of picking lists and packing slips when you filter on the delivery date or the ship date.

4.5.1.1 Picking Policy In Dynamics 365, it is not required to process picking as a separate step. Depending on the setup, you can skip picking and immediately ship an item by posting the packing slip or the invoice. If you want to process picking, the warehouse policy (which distinguishes between the basic approach and the advanced warehouse management) determines the available options. Depending on the warehouse policy, there are the following options for the picking process:  One-step picking o Pick form – Manual recording in the pick form. o Picking list – With automatic picking list registration.  Two-step picking o Order picking – Picking list, followed by picking list registration. o Advanced warehouse management – Picking wave, followed by mobile device transactions. One-step picking is a process that includes picking but does not require a confirmation of the picked quantity. This way of picking is only used in the basic approach for warehouse management.

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Two-step picking requires confirming the quantity that has been actually picked. In a warehouse with the basic approach, this is done by entering the picking list registration (on the basis of the picking list which has been posted before). In a warehouse with advanced warehouse management, the confirmation is done with mobile device transactions (based on preassigned picking wave work).

Figure 4-16:

Options for sales order picking in Dynamics 365

This section explains the picking process in the basic approach for warehouse management. You can find a description of how to process picking with advanced warehouse management in section 8.1.2 of this book.

4.5.1.2 Core Settings for Picking As a prerequisite for the picking process, the setup has to be completed. If the advanced warehouse management is enabled, two-step-picking applies. If the basic approach for warehouse management is used, the accounts receivable parameters determine whether there is one-step or two-step picking:  One-step picking – If the Picking route status on the tab Updates/Picking list of the accounts receivable parameters is set to “Completed”, automatic picking list registration is enabled. In this case, the posted quantity is immediately deducted from inventory when posting the picking list.  Two-step picking – If the Picking route status is set to “Activated”, Dynamics 365 does not change the quantity in inventory when posting the picking list. In this case, update the Picking list registration afterward. Picking is only possible for inventoried items (controlled by the checkbox Stocked product in the item model group). The item model group of the item also controls whether picking is mandatory before posting the packing slip (checkbox Picking requirements on the tab Inventory policies of the item model group).

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4.5.1.3 New in Dynamics 365 Compared to Dynamics AX 2012, the module “Warehouse Management II” has been discontinued and items related to consolidated picking have been replaced by appropriate features in the advanced warehouse management.

4.5.2

Pick Form and Picking Lists

Picking in sales matches the inventory registration in purchasing: The picked quantity reduces the on-hand inventory, and the status of this quantity is “Picked”. Like the inventory registration in purchasing, picking is a preliminary transaction which is not shown in a separate inventory transaction.

4.5.2.1 Pick Form The first option for picking, using the pick form, is a manual registration in the sales order. The pick form in sales works similar to the registration form in purchasing (see section 3.5.3). In a similar way to the inventory registration, the pick form can be used, for example, to split the transaction of a single order line into lines with different locations, batch numbers, or serial numbers. In order to access the pick form, click the button Update line/Pick in the toolbar of the order lines in the sales order form. In the pick form, you can insert lines for picking in the lower Picking lines pane. Apart from manually entering records with the button Add in the lower pane, the button Add picking line in the toolbar of the upper pane is another way to insert lines. Edit the quantity, the warehouse, or other inventory dimensions in the lower pane as applicable before you post the transaction with the button Confirm pick all in the toolbar of the lower pane.

4.5.2.2 Picking Lists If you need a printed report for the picking work in the warehouse, post and print a picking list. In order processing, picking lists are another way to register a pick transaction. There are the following ways to post the picking list:  Sales order – Sales order form, button PICK AND PACK/Generate/Generate picking list in the action pane.  Summary update – Sales and marketing> Sales orders> Order shipping> Generate picking list.  Release picking – Start from the Release sales order picking form, see below.  Picking workbench – Group picking lists to batches, see section 4.5.3. If the warehouse usually picks all items immediately, it is useful to enable one-step picking (the parameter Picking route status in the accounts receivable parameters is set to “Completed” for this purpose). With this setup, no manual picking list registration is required, and the next step is packing slip posting.

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4.5.2.3 Picking List Registration In case two-step picking is enabled (accounts receivable parameter Picking route status set to “Activated”), you have to execute the picking list registration after posting a picking list. In order to access the picking list registration form, click the button PICK AND PACK/Generate/Picking list registration in the sales order form, or open the menu item Sales and marketing> Sales orders> Order shipping> Picking list registration, or the menu item Inventory management> Outbound orders> Picking list registration. If you open the picking list registration from the sales order, there is a filter on the current order. Otherwise, you have to enter a filter on the respective orders manually.

Figure 4-17:

Picking list registration accessed from a sales order

On the tab Lines in the picking list registration form, select the checkbox in the column Select in the lines which you want to update (see Figure 4-17). Before you confirm the picked quantity of the selected lines with the button Functions/Update selected in the toolbar of this tab (or the button Updates/Update all in the action pane of the form for all lines), you can adjust the quantity in the column Pick quantity as applicable.

4.5.2.4 Release Sales Order Picking If you want to start picking from an overview that shows order lines which ready for shipping, use the release picking form. The release picking form only shows items which currently are in stock.

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When you open the release picking form (Inventory management> Periodic tasks> Release sales order picking), an advanced filter is shown in which you can enter filter criteria on order lines. If you need to change this filter, click the button Select in the action pane of the release picking form. In order to start the picking process, activate the items which should be picked. You can do this with the button Activation in the action pane (select the appropriate option within this button), or manually by entering a quantity in the column Activate now. Activation also reserves the respective quantity. For the quantities in the column Activate now, you can post the picking list with the button Release for picking in the action pane. The further process with one-step picking or two-step picking is the same as when posting the picking list directly from the order. If you want to specify priorities for picking based on the customer, you can enter a Classification group on the tab General of the customer form. The customer classification group is shown in the left-most column of the release picking form, and you can set a filter on this group.

Figure 4-18:

Release sales order picking

4.5.2.5 Reverse Pick Transactions If you want to reverse a pick transaction that has been posted in the pick form or in a picking list, you can use the pick form.

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In the pick form, which you can access with the button Update line/Pick in the toolbar of the respective sales order line, first select the transaction which you want to reverse in the upper pane and then click the button Add picking line. Posting the reversal with the button Confirm pick all works similar to regular picking, but with a negative quantity. If the original pick transaction has been posted with a picking list, you can alternatively use the picking list registration to reverse picking. Open the picking list registration from the menu or with the button PICK AND PACK/Generate/Picking list registration in the sales order form for this purpose. In the picking list registration detail form, click the button Functions/Unpick in the toolbar of the tab Lines to cancel the picking list registration. In a second step, click the button Functions/Cancel picking route in the action pane of the picking list registration to cancel the picking list completely. You can skip the second step if you already set the slider Cancel unpicked quantity in the Unpick dialog to “Yes”.

4.5.3

Picking Workbench

The picking workbench is an enhancement for sales order picking in paper-based warehouse processes, which you can use if you need to group picking lists to batches (picking waves). If the picking process includes putting the items into boxes, you can optionally apply a boxing logic to collect items in boxes or carts. Dynamics 365 then suggests boxes of an appropriate size for picking. You can use the picking workbench as an alternative to the Release sales order picking functionality (described in section 4.5.2).

4.5.3.1 Setup for the Picking Workbench As a prerequisite for the picking workbench, the respective number sequences have to be specified in the inventory parameters. And if you want to use the boxing logic, the slider Boxing logic for picking workbench on the tab General of the parameters has to be set to “Yes”. In the workbench profiles (Inventory management> Setup> Picking workbench> Workbench profiles), you can set up one or more profiles which are used as filter criteria in the picking workbench. In the warehouse form (Inventory management> Setup> Inventory breakdown> Warehouses), the tab Picking workbench contains settings (e.g., the maximum number of lines per picking list) on how to split picking waves (workbench sessions). If you want to use the boxing logic in the picking workbench, enter the individual boxes with their physical dimensions and weight in the menu item Inventory management> Setup> Boxing logic> Box definitions. The slider Active controls whether a box is available for picking.

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In the released product detail form, the slider Apply boxing logic for picking workbench on the tab Deliver has to be set to “Yes” for items which should use the boxing logic. The selection of applicable boxes for an item is only based on the physical dimensions and the weight of the item (specified on the tab Manage inventory of the released product). If the slider Ship alone on the tab Deliver of the released product is set to “Yes”, the item is picked separately without boxing.

4.5.3.2 Working with the Picking Workbench The starting point for picking in the picking workbench are sales orders which should be shipped. In the picking workbench (Inventory management> Outbound orders> Picking workbench), you can start the picking process and create a new picking session with the button New in the action pane. In the next step, enter filter criteria (e.g., on the Ship date of the order line) on the tab Criteria which determine the sales orders which are included in the current picking session. The field Profile on this tab provides the option to select a workbench profile with default values for the criteria fields.

Figure 4-19:

Managing a picking batch in the picking workbench

Once you have entered appropriate filter criteria, click the button PICKING SESSION/Picking session/Generate picking batches in the action pane of the picking workbench. Depending on the criteria, on settings for the split of picking batches in

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the warehouse form, and on settings for boxing (box size and item size/weight), Dynamics 365 creates one or more picking batches (they are shown on the tab Picking batches). When you generate picking batches, corresponding picking lists are posted. You can view the picking lists that are linked to a picking batch on the tab Picking list in the workbench. Printing the picking batch label and the picking list is a required step, which you can execute with the button Print batch in the toolbar of the tab Picking batches in the workbench (or the button PICKING SESSION/Picking session/Print session in the action pane). For items which apply the boxing logic, the selected box name is printed in the picking list header. After printing all picking lists of a picking batch, select the checkbox Complete in the picking batch. Alternatively, set the slider Complete in the picking session to “Yes” to complete all picking batches of the session at the same time. The further process with one-step picking or two-step picking is the same as when posting the picking list directly from the order (see section 4.5.2). In case of twostep picking, you can directly access the picking list registration with the button Picking list registration on the tab Picking list of the picking workbench.

4.5.4

Packing Slips

Posting the packing slip (delivery note) is the last step in the picking and shipping process.

4.5.4.1 Posting Dialog for Packing Slips In order to post a packing slip, click the button PICK AND PACK/Generate/Packing slip in the sales order form or open the menu item Sales and marketing> Sales orders> Order shipping> Post packing slip. The dialog for packing slip posting then shows the familiar format. In the lookup field Quantity on the tab Parameters, select the applicable option depending on the prior process:  Picked – Select this option, if picking is executed before posting the packing slip. The picked quantity then is the default for the posting quantity, but you can edit the quantity in the column Update on the tab Lines of the posting dialog.  Picked quantity and non-stocked products – Includes the ordered quantity of non-stocked products in addition to picked quantity of stocked items.  All – The total remaining order quantity is used as posting quantity.  Deliver now – The quantity of the column Deliver now in the order lines is used as posting quantity. If you want to post and print the packing slip, make sure that both sliders, Posting and Print packing slip, in the dialog are set to “Yes” before you click the button OK. You can process partial deliveries, overdeliveries, and underdeliveries in sales in the same way as in purchasing (see section 3.5.5). If you want to learn about the

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order status and the document status update, you can refer to the corresponding purchase order status (see section 3.5.6).

4.5.4.2 Ledger Integration If ledger integration is activated for packing slip posting, Dynamics 365 is posting general ledger transactions in parallel to the inventory transactions. These ledger transactions are reversed when posting the related invoice. Following core settings control packing slip posting to the general ledger:  Accounts receivable parameters – The slider Post packing slip in ledger on the tab Updates/Packing slip has to be set to “Yes” to enable ledger posting (not required for standard cost items).  Item model group – The checkbox Post physical inventory on the tab Costing method & cost recognition in the item model group of the item has to be selected. These settings work similar to the corresponding settings for the ledger integration of product receipts in purchasing.

4.5.4.3 Transaction Inquiry If you want to view the inventory transactions that refer to an order line, select the respective line in the sales order and click the button Inventory/Transactions in the toolbar of the order lines. After posting the packing slip, the issue status of the inventory transaction is “Deducted”. The posting date of the packing slip is shown in the column Physical date whereas the Financial date remains empty until posting the invoice. The packing slip number is shown on the tab Updates of the Transaction details form (access with the button Transaction details in the inventory transaction).

Figure 4-20:

Inventory transaction after packing slip posting

In order to view the posted packing slips, open the menu item Sales and marketing> Sales orders> Order shipping> Packing slip or click the button PICK AND PACK/ Journals/Packing slip in the sales order form. Select a packing slip on the tab Overview of the inquiry and switch to the tab Lines if you want to view the related packing slip lines. You can view the related ledger transactions in the voucher transaction form, which you open with the button Vouchers in the action pane of the packing slip inquiry (or with the button Ledger/Physical voucher in the inventory transactions).

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4.5.4.4 Canceling a Packing Slip If you want to cancel a posted packing slip, use the Cancel feature in the packing slip inquiry. Open the packing slip inquiry with the button PICK AND PACK/Journals/ Packing slip in the sales order form for this purpose, select the respective packing slip and click the button Cancel in the action pane. If you only want to reduce the posted quantity, click the button Correct. Canceling and correcting a packing slip does not change the original transaction, but posts a new transaction which offsets the original one.

4.5.5

Case Study Exercises

Exercise 4.8 – Packing Slip You are asked to review the order lines which are available for shipping. The inquiry should not be limited to your orders, but include all applicable orders in your company. Which options do you know? Your order of exercise 4.5 is among the orders which are ready to be shipped. Check following items in this order before you post the packing slip:  Order status and document status.  Inventory quantity of the ordered item.  Inventory transactions for the order line. Post and print a packing slip for the complete order quantity in the sales order form and select a print preview as the print destination. Then review the status of the items in the list above again. What is different after packing slip posting? Exercise 4.9 – Picking List The customer of exercise 4.1 orders another 20 units of the item which you have created in exercise 3.5. Enter an appropriate sales order. The warehouse requires a picking list this time. Post and print a picking list with 10 units of the ordered item. Can you tell which setting controls whether you need to execute a picking list registration? If required, perform the picking list registration. Then post the packing slip for the picked items. Exercise 4.10 – Packing Slip Inquiry Review the packing slip of exercise 4.9 in the packing slip inquiry, which you access from the sales order form first and then from the navigation pane. Is it possible to update the posted packing slip?

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Sales Invoices

Posting the sales invoice is the last step in sales order processing. The invoice increases the open customer balance and reduces the financial value in inventory. After invoicing all lines of a sales order, the sales order is completed. The payment of invoices is processed separately in finance (see section 9.3.3). If you want to invoice a stocked product, you have to process a sales order. But it is not required to perform the complete sales process with order confirmation, picking, and shipping – you can post the sales order invoice immediately after entering the order (if no restrictions are specified in the item model group). You can use a free text invoice if you want to post an invoice which is not related to products or sales categories. In the lines of a free text invoice, you have to enter ledger accounts instead of item numbers. Free text invoices have no reference to items and no impact on inventory and supply chain management.

4.6.1

Sales Order Invoices

The way of posting a sales invoice is similar to posting the packing slip.

4.6.1.1 Posting Dialog for Sales Order Invoices In order to post a sales invoice, click the button INVOICE/Generate/Invoice in the sales order form or open the menu item Accounts receivable> Invoices> Batch invoicing> Invoice. The posting dialog then shows the familiar format. In the lookup field Quantity on the tab Parameters, select the applicable option depending on the prior process:  Packing Slip – Usual option, since in most cases a packing slip is posted first and you want to invoice the shipped quantity.  All or Deliver now – If selected, Dynamics 365 does not initialize the column Update in the invoice lines with the shipped quantity. For any quantity not shipped yet, the physical transaction is posted in parallel to the invoice. If you select the option “Packing Slip” in the lookup field Quantity, you can select or deselect particular packing slips for invoicing with the button Select packing slip in the toolbar of the tab Overview in the posting dialog. Before posting, you check the totals with the button Totals on the tab Overview of the posting dialog. If you want to post and print the invoice finally, make sure that both sliders Posting and Print invoice in the dialog are set to “Yes” before you click the button OK.

4.6.1.2 Transaction Inquiry Posting the invoice generates general ledger transactions, inventory transactions, customer transactions, and transactions in other subledgers like the sales tax (as applicable). Once all lines of a sales order are completely invoiced, the order status is “Invoiced”.

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If you want to view the inventory transactions that refer to an order line, select the respective line in the sales order and click the button Inventory/Transactions in the toolbar of the order lines. After posting the invoice, the issue status of the inventory transaction is “Sold” and the posting date of the invoice is shown in the column Financial date. In order to view the posted sales invoices, open the menu item Accounts receivable> Inquiries and reports> Invoices> Invoice journal or click the button INVOICE/Journals/ Invoice in the sales order form. Click on an invoice number shown as a link in the grid if you want to open the related invoice detail form. In the invoice detail form, you can view the invoice lines on the tab Lines.

4.6.1.3 Ledger Transactions and Transaction Origin If you want to view the ledger transactions that refer to a posted invoice, open the voucher transaction form with the button Voucher in the invoice inquiry or with the button Ledger/Financial voucher in the inventory transactions. The button Transaction origin in the voucher transaction form provides access to the transaction origin form, which shows all related transactions in all modules. The particular ledger accounts in the transactions depend on the actual procedure and on the applicable setup. The customer summary account for the customer transaction is specified in the applicable customer posting profile, which works similar to the vendor posting profile (see section 3.2.3). The settings for the main account in the other transactions – except for the sales tax transaction – are given in the posting setup (see section 9.4.2).

4.6.2

Collective Invoices

If you want to post an invoice which covers multiple sales orders (e.g., a monthly invoice), you have to post a collective invoice in a summary update. Collective documents are available for all document types. Apart from collective invoices, you can, for example, also post collective packing slips. The way of posting collective documents is not different from posting an individual document. The setup for summary updates at the company level and at the customer level controls whether it is possible to combine orders into collective documents.

4.6.2.1 Setup for Summary Updates The tab Summary update/Summary update in the accounts receivable parameters contains basic configuration settings for collective sales documents. The lookup field Default values for summary update on this tab is a core setting for summary updates. In most cases, the option “Automatic summary” is selected, which makes it possible to deselect orders from a collective document already in the order. If the option “Invoice account” is selected, you can only exclude a particular order by removing it in the posting dialog.

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The summary update parameter form, which you can access with the button Summary update parameters in the toolbar of the tab Summary update/Summary update in the accounts receivable parameters, contains separate tabs per document type. For each document type, you can specify, which fields in a sales order must have the same content to join a collective document. If the option “Automatic summary” is selected in the parameter field Default values for summary update, you have to enable the automatic summary per customer (click the button CUSTOMER/Set up/Summary update in the customer form). The setting in the customer is the default for related sales orders. In the sales order form, you can access and edit this setting with the button GENERAL/Set up/Summary.

4.6.2.2 Posting Collective Invoices In order to post a collective invoice, open the menu item Accounts receivable> Invoices> Batch invoicing> Invoice. In the lookup field Quantity of the posting dialog, select the option “Packing slip” if you want to make sure that the invoice only covers items that have been shipped.

Figure 4-21:

Posting a collective sales invoice

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Then click the button Select [1] in the posting dialog (see Figure 4-21) and select applicable sales orders in the Advanced filter dialog. After closing the filter dialog, the selected orders are shown on the tab Overview of the posting dialog. If there are orders which you do not want to invoice, select the respective records on the tab Overview of the posting dialog and delete them (click the button Remove in the toolbar of this tab). Deleting a record in the posting dialog removes only the selection. It does not delete the order or the packing slip, which is why the order is shown again whenever you select orders when posting the next invoice. If you want to include or exclude particular packing slips from invoice posting, click the button Select packing slip [2]. Once you have selected the required sales orders and packing slips, click the button Arrange [3]. Arranging combines the orders into a common invoice as specified in the summary update parameters. If the setting in the accounts receivable parameters is not suitable for a particular invoice, you can select a different option in the lookup field Summary update for on the tab Parameters of the posting dialog before arranging. In the example of Figure 4-21, the Arrange feature merges the two orders into one common line. You can subsequently post the collective invoice with the button OK in the posting dialog.

4.6.3

Free Text Invoices

Free text invoices are independent of sales orders, shipments, and inventory. You can use free text invoices to sell intangible items or fixed assets. The structure of free text invoices is similar to sales orders: Every free text invoice consists of a header and one or more lines. Instead of product numbers and sales categories, the lines of a free text invoice contain main accounts. If you want to create a credit note, enter a negative invoice amount in the free text invoice. But item statistics and inventory valuation do not include free text invoices and free text credit notes. Once you have entered the free text invoice, you can post and print it. The invoice is the only document which you can generate in a free text invoice. It is not possible to generate other documents (e.g., order confirmations).

4.6.3.1 Registering Free Text Invoices In order to enter a free text invoice, open the menu item Accounts receivable> Invoices> All free text invoices and click the button New in the action pane. Alternatively, you can access the customer form and create a free text invoice with the button INVOICE/ New/Free text invoice in action pane of this form. Unlike the sales order form, the free text invoice form does not open a separate Create dialog when you create a new record. But the fields Customer account and

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Invoice account, in which you select the respective customer, are not only shown in the header view of the free text invoice form, they are also included on the tab Free text invoice header in the lines view.

Figure 4-22:

Registering an invoice line in a free text invoice

Then enter the lines with Description, Main account, and Amount (or Quantity and Unit price). If a line requires a longer description, you can enter it in the field Invoice text on the sub-tab General of the tab Line details. If sales tax (VAT) applies, make sure to select a correct Sales tax group and Item sales tax group. If you sell a fixed asset, enter the Fixed asset number on the sub-tab General of the tab Line details. You can update the financial dimensions (e.g., the department or cost center) on the sub-tab Financial dimensions line of the tab Line details – enter applicable dimension values individually or select a financial dimension default template in the lookup field Template ID.

4.6.3.2 Posting and Inquiry In order to post the free text invoice, click the button Post in the action pane of the free text invoice form. You can view the posted invoice with the button INVOICE/ Related information/Invoice journal afterward.

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In the invoice inquiry (Accounts receivable> Inquiries and reports> Invoices> Invoice journal), free text invoices are shown in parallel with the sales order invoices. For free text invoices, there is no order number that is shown in this inquiry.

4.6.3.3 Recurring Free Text Invoices If you want to issue a particular free text invoice periodically, you can use recurring free text invoices. As a prerequisite for this kind of invoices, set up free text invoice templates (Accounts receivable> Invoices> Recurring invoices> Free text invoice templates) and assign customers to one or more templates (with the button INVOICE/Set up/Recurring invoices in the customer form). In order to generate a periodical free text invoice based on these settings, open the menu item Accounts receivable> Invoices> Recurring invoices> Generate recurring invoices. The periodic activity generates regular free text invoices, which you can review in the free text invoice form before posting.

4.6.4

Case Study Exercises

Exercise 4.11 – Sales Invoice The items which you have shipped in exercise 4.8 need to be invoiced. Before posting the invoice, review following items:  Order status and document status of the sales order.  Inventory transaction for the order line. Post and print the invoice directly in the sales order form and check the invoice total in the posting dialog. Then review the status of the items in the list above again. What is different now? Exercise 4.12 – Partial Invoice Invoice the items which you have picked and shipped in exercise 4.9. Post and print the invoice in the sales order form and make sure to invoice only the items which you have shipped. Exercise 4.13 – Shipping with Invoice The customer of exercise 4.1 orders another unit of the product of exercise 3.5. In addition, he wants to order one hour of the installation service of exercise 4.2 for a price of USD 110. This time you do not post a packing slip, but you want to ship the items with the invoice. Enter an appropriate sales order and immediately post the invoice. After posting the invoice, review the order status, the document status, and the inventory transaction of the product. Exercise 4.14 – Invoice Inquiry Review the invoice which you have posted in exercise 4.11 in the invoice inquiry. Check the invoice header and the invoice lines.

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Exercise 4.15 – Free Text Invoice Invoice a service to the customer of exercise 4.1. There is no product or sales category for this service. For this reason, enter and post a free text invoice with an appropriate revenue account. What is the difference between a free text invoice and a sales order invoice?

4.7

Sales Credit Notes and Item Returns

A credit note is a document which you issue if a customer returns an item to your company and receives financial compensation. You can also post a credit note if the customer does not actually return the defective item, or if you have to credit a price variance. In order to manage customer returns, you can use the return order management in Dynamics 365. In case of a simple return process, you can use regular sales orders instead of return orders. If a credit note does not cover inventoried items, you can use a free text invoice.

4.7.1

Return Order Management

Return orders support a proper procedure for item returns. With return orders, a customer has to contact you in order to receive a return merchandise authorization (RMA) before returning a product.

4.7.1.1 Disposition Codes and Required Setup As a prerequisite for the use of return orders, you have to set up disposition codes (Sales and marketing> Setup> Returns> Disposition codes). In the disposition code form, the field Action is the core setting. It controls the handling of a returned item and includes the following options:    

Credit only – Credit without item return. Credit (or Scrap) – Return items and credit. Replace and credit (or Replace and scrap) – Return items and replace. Return to customer – Do not credit.

An item receipt has to be posted in all cases, no matter if the products are returned to stock or if they are scrapped. But in case of scrap, an inventory transaction for scrapping is posted parallel to the receipt of the return order. Apart from disposition codes, a number sequence for return orders is required in the number sequences (Organization administration> Number sequences> Number sequences) for the Area “Order management” and the Reference “RMA number”.

4.7.1.2 Return Order Registration Return orders are sales orders with the order type “Returned order”. The sales order number of a return order is shown in the return order header. But except for

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return orders with the disposition code “Credit only”, return orders are not shown in the regular sales order form until the item arrival is posted. The workspace Sales return processing gives an overview of the current return orders. The tile All return orders on the left provides access to the return order list page. If you want to create a new return order in the workspace, click the button New/Return order in the action pane. The following steps are the same as when you create a return order from the return order form. In order to access the return orders from the menu, open the list page Sales and marketing> Sales returns> All return orders. When you create a new return order, you can optionally select a Return reason code in the Create dialog or in the return order header. The return reason code is used for statistical purposes and – if applicable – for the automatic assignment of charges.

Figure 4-23:

Registering a line in the return order form

If you want to copy an original sales order (in fact sales invoice lines) into the new return order, click the button RETURN ORDER/Return/Find sales order in the action pane. Alternatively, you can enter return order lines with a negative quantity manually. The Disposition code of a line is shown on the sub-tab General of the tab Line details. But except for disposition codes with the Action “Credit only” (crediting without physical return), you do not enter the disposition code before item arrival. Optionally, you can click the button RETURN ORDER/Send/Return order in the return order to print an RMA document which you can send to the customer. If you want to send an up-front replacement for the returned item to the customer, you can create the respective sales order with the button RETURN ORDER/New/ Replacement order in the return order.

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4.7.1.3 Return Orders without Physical Returns If you do not want the customer to return the item, select a disposition code without item return (“Credit only”) on the sub-tab General of the tab Line details in the return order. In this case, you can immediately post the credit note in the sales order form (Sales and marketing> Sales Orders> All sales orders) or in the summary update for invoices (Accounts receivable> Invoices> Batch invoicing> Invoice).

4.7.1.4 Return Orders – Item Arrival and Credit Note Once you receive the items of a return order, you have to record an inventory registration. Like the inventory registration in purchasing (see section 3.5.3), the registration for return orders can be done in the registration form (button Update line/Registration in the return order lines) or in the item arrival journal. In a warehouse with advanced warehouse management, inventory registration is done with mobile device transactions. If you use an item arrival journal (Inventory management> Journal entries> Item arrival> Item arrival, see section 7.4.2), select the option “Sales order” in the lookup field Reference and enter the RMA number in the dialog which is shown when creating a new journal. You can update this reference, which is a default for the journal lines, on the tab Default values in the journal header view. In addition, you can enter a Disposition code in the header which is used as default value for the journal lines. In order to create journal lines in the item arrival journal, either click the button Functions/Create lines in the action pane or manually enter the lines in the lines view of the journal. The disposition code has to be specified in the journal lines before you can post the item return. If it is not possible to decide upon the disposition code at the time when you receive the item, set the slider Quarantine management in the journal line to “Yes” (you can enter a default value in the journal header) and leave the disposition code empty. In this case, a quarantine order (see section 7.4.6) is created when you post the item arrival, and it is not required to enter the disposition code before ending quarantine. After posting the item arrival journal with the button Post, the status of the return order line is updated to “Registered”. Once you have finished inventory registration, you can optionally print a receipt acknowledgment with the button RETURN ORDER/Send/Acknowledgement in the return order form. Then post the packing slip (with a negative quantity) in the return order form (button RETURN ORDER/Generate/Post packing slip) or in the sales order form (button PICK AND PACK/Generate/Packing slip) and make sure to select an appropriate option (usually “All” – you have posted an inbound registration and not an outbound picking) in the lookup field Quantity of the posting dialog.

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In order to credit the customer financially, open the sales order form, select the respective order and click the button INVOICE/Generate/Invoice in the action pane. Alternatively, you can use the summary update for invoices (Accounts receivable> Invoices> Batch invoicing> Invoice).

4.7.2

Simple Credit Notes

If you do not want to process a customer return in a return order, you can use a regular sales order to credit the customer. If it is not required to track the physical and financial process at the level of the item, you can also use a free text invoice. The credit note is processed as an invoice with a negative quantity/amount then.

4.7.2.1 Credit Note from a Sales Order In the sales order form, there are the following options for crediting:  Original order line – Negative Deliver now quantity.  New order line – Order line with a negative quantity in the original order.  New order – Order line with a negative quantity in a new sales order. The way to enter a new order or a new order line for a credit note in sales is similar to the way to enter an order for a credit note in purchasing (see section 3.7.1). But since it is not possible to select the order type “Returned order” in a sales order manually, the order header of an order which you enter for crediting in the sales order form looks like the header of any regular sales order. If you want to record a credit note in the original sales order line, enter a negative quantity in the column Deliver now in that line. When you post the credit note (by posting an invoice), select the option “Deliver now” – which refers to the column Deliver now – in the lookup field Quantity of the Posting invoice dialog.

4.7.2.2 Inventory Valuation for Returned Items If you register a credit note in a new order or order line, you should select the original invoice transaction in the lookup field Return lot ID (on the sub-tab Setup of the tab Line details) of the order line before posting. This link to the return lot makes sure that the inventory value of the crediting line exactly matches the inventory value of the original delivery. Dynamics 365 automatically inserts the return lot ID when you create a credit note line with the button RETURN ORDER/Return/Find sales order in the return order form or with the button SELL/Create/Credit note in the sales order form. If you do not select a return lot ID, Dynamics 365 uses the Return cost price on the sub-tab Setup of the crediting order line for inventory valuation.

4.7.2.3 Scrapping Items If you do not want the customer to return a defective item, set the slider Scrap on the sub-tab Setup of the order line to “Yes”. When you post the invoice (credit note), Dynamics 365 posts the item receipt and a related inventory loss at the same

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time. In return orders, the slider Scrap in the order line is controlled by the disposition code.

4.7.2.4 Refunds not Related to Item Returns The free text invoice (see section 4.6.3) is another option to register and post customer refunds. But if a refund refers to an item, you should not use a free text invoice, since this kind of invoicing is not included in item statistics and inventory valuation. If you need to credit a price variance, rather enter a new sales order with one line with a negative quantity and the old price and one line with a positive quantity and the actual price. You can link both transactions (in order to offset the inventory value) with the button Inventory/Marking (see section 3.7.1).

4.7.3

Case Study Exercise

Exercise 4.16 – Sales Credit Note Your customer complains about defects on the items which you have invoiced in exercise 4.11. You agree to accept an item return and to credit the invoice. Enter a return order and post the item receipt with an appropriate disposition code. Then post the packing slip for the item return, and finally post and print the credit note.

4.8

Direct Deliveries

Direct delivery means that goods are directly shipped from a vendor to a customer. This means there is no purchase receipt and sales shipment in the warehouse, which saves time and expenses for transportation and stocking.

4.8.1

Processing Direct Deliveries

The functionality for direct delivery in Dynamics 365 is based on a purchase order which is created from a related sales order. There are the following options for creating this purchase order:  Purchase order from a sales order – Create a purchase order in a sales order.  Direct delivery from a sales order – Create a direct delivery purchase order.  Direct delivery type in a sales order line – Automatically creates a direct delivery purchase order.  Direct delivery workbench – Create a direct delivery from the workbench. Whereas creating a regular purchase order or a direct delivery purchase order from a sales order does not require specific settings, the direct delivery workbench requires that direct delivery is enabled in the sales order line.

4.8.1.1 Regular Purchase Order from a Sales Order You can create a regular purchase order from a sales order if you want to process the purchase order with reference to the sales order (separate from other orders), but nevertheless receive and ship it in a warehouse of your company.

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As a starting point, enter a regular sales order. Once you have completed the sales order, click the button SALES ORDER/New/Purchase order in the action pane to create a related purchase order. In the Create purchase order dialog, select the checkbox Include in the respective lines and choose a vendor (if no main vendor is specified in the item). Processing the purchase order and the sales order works like processing regular orders, including change management for the purchase order. In the purchase order, the delivery address for the vendor is the warehouse or company address (like in any regular purchase order). You can post the product receipt in your warehouse and then perform picking and shipping to the customer.

4.8.1.2 Direct Delivery Purchase Order from a Sales Order You can also enter a regular sales order in case of direct delivery from the vendor to the customer. But it is useful to select a separate warehouse for direct deliveries to avoid confusing regular inventory transactions in the warehouse with the transactions for direct delivery.

Figure 4-24:

Printing a sales packing slip for direct delivery with product receipt posting

Click the button SALES ORDER/New/Direct delivery in the sales order to create a direct delivery purchase order, which has got a tight link to the sales order. The delivery address of the purchase order is the customer address, modifications of the address and other data in the sales order which are relevant to purchasing (e.g., the quantity or the delivery date) are synchronized to the purchase order. In case of changes, you have to observe the purchase order change management, which at least requires a confirmation of the modified purchase order. When you post the product receipt for direct delivery in purchasing, Dynamics 365 automatically posts the related sales packing slip. If you need to print a packing

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slip for the customer, set the slider Print sales documents in the posting dialog for the product receipt to “Yes” (see Figure 4-24). Invoice posting in sales is independent of the purchase invoice.

4.8.1.3 Delivery Type for Direct Delivery If you select the option “Direct delivery” in the column Delivery type (or in the corresponding field on the sub-tab Sourcing of the order line) of a sales order line, a direct delivery purchase order is immediately created when saving the sales order line. The vendor for the direct delivery purchase order is specified in the field Sourcing vendor on the sub-tab Sourcing of the sales order line. The main vendor for the item is used as default value for this field. With this setting, you do not need to create the purchase order with the button Direct delivery in the sales order. The further proceeding with product receipt and invoice posting for the direct delivery is the same as described above.

4.8.1.4 Direct Delivery Workbench The direct delivery workbench gives an overview of all sales orders with direct delivery and allows processing the related purchase and sales orders. You can use the direct delivery workbench if the slider Direct delivery on the subtab Delivery of the sales order line is set to “Yes” (default from the released product, tab Deliver). In addition, you must specify the main vendor for the item. In the direct delivery workbench (Procurement and sourcing> Purchase orders> Direct delivery processing> Direct delivery), sales orders with direct delivery are initially shown on the tab Direct delivery. You can click the button Create direct delivery in the toolbar of this tab to create the purchase order. This purchase order – and any other direct delivery purchase order which is created independently of the workbench – is then shown on the tab Confirmation of the workbench. You can post the purchase order confirmation on this tab. On the tab Delivery in the workbench, you can finally post the product receipt (together with the packing slip).

4.8.1.5 Links between Purchase and Sales Order The field group Item reference on the sub-tab Product of the purchase or sales order line shows the sales order line linked to a purchase order line (or the purchase order line linked to a sales order line). In addition, the reference is shown in the Related orders dialog (access with the button GENERAL/Related information/Related orders in the action pane of the purchase or sales order). In the sales order form, you can click the button GENERAL/Related information/Purchase order to access the assigned purchase order directly.

4.8.1.6 New in Dynamics 365 Compared to Dynamics AX 2012, there is the Delivery type in the sales order lines, which you can use to create direct delivery purchase orders automatically.

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Case Study Exercise

Exercise 4.17 – Direct Delivery The customer of exercise 4.1 orders 100 units of the item of exercise 3.5. In order to avoid stocking this large quantity in the warehouse, you want to process a direct delivery. Enter an appropriate sales order and create a direct delivery purchase order which you send to the vendor of exercise 3.2. Your vendor confirms shipping the item with packing slip PS417. Post this product receipt in the purchase order. In the next step, review the status of the sales order before you post and print the sales invoice. Finally, you receive the purchase invoice VI417 which you post in the pending vendor invoices.

4.9

Trade Allowances and Incentive Management

Customer rebates and trade allowances are contracts which specify a discount depending on the actual sales volume. Usually, the customer receives a credit note or a payment at the end of a period if the total sales amount or quantity meets the target as agreed in the rebate contract. Incentive management in Dynamics 365 does not only cover customer agreements, but also agreements with vendors, broker contracts, and royalty contracts:    

Customer rebates – Rebate contracts with customers. Trade allowances – Enhanced customer rebate functionality. Vendor rebates – Rebate functionality in purchasing (similar to sales). Broker contracts – Reimbursement of agents (set up as vendors) based on the sales revenue with particular customers.  Royalty contracts – Reimbursement of royalty owners (set up as vendors) based on the sales volume of particular items. Customer rebate agreements (Sales and marketing> Customer rebates> Rebate agreements) with the rebate program type “Rebate” and “TMA” work similar to the bill back trade allowance agreement which is described below.

4.9.1

Trade Allowances

Trade allowance agreements in Dynamics 365 are used for the calculation and the payment of rebates, and for the analysis of the profitability of promotions. You can group trade allowances in Dynamics 365 into three categories:  Bill back – Allowances based on the posted invoices in a period, paid to the order customer or the invoice customer.  Lump sum – Allowances paid upfront to an agent (vendor or customer).  Invoicing rebate – Allowance immediately deducted from the sales invoice.

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4.9.1.1 Required Setup for Trade Allowances As a prerequisite for trade allowance agreements, you have to set up a customer hierarchy (Sales and marketing> Trade allowances> Customer category hierarchy) with the customers who use trade allowances. In order to create a hierarchy, click the button New in the action pane of the hierarchy form. If you want to create a multilevel hierarchy structure for the hierarchy, click the button New category node in the toolbar of the tab Categories. With the button Add/remove customer in the action pane you can assign new or view existing customers for a category node.

Figure 4-25:

Managing customer hierarchy categories

In the merchandising event categories (Sales and marketing> Setup> Trade allowance> Merchandising event category), at least one category per trade allowance type is required:  Bill back – Category with Default type “Bill back”.  Lump sum – Category with Default type “Lump sum”.  Invoicing rebate – Category with Default type “Off invoice”. For bill back trade allowance agreements, at least one program type with the Rebate program type “Bill back” has to be set up in the rebate program types (Sales and marketing> Customer rebates> Rebate program types). Following parameter settings are required prerequisites for trade allowances:  Accounts receivable parameters – Select an AR consumption journal and a Rebate accrual journal on the tab Rebate program/Journals. Optionally set the slider Rebates at invoicing to “Yes” (if you want to generate a rebate claim immediately when posting an applicable sales invoice). On the tab Number sequences, enter number sequences for the Reference “Rebate ID” and “Rebate agreement ID”.  Trade allowance management parameters (Sales and marketing> Setup> Trade allowance> Trade allowance management parameters) – Enter the required number sequences and optionally select a default Customer hierarchy and a Default rebate program ID. If you want to use lump sum allowances, optionally select an Expense account or a Procurement category for lump sum transactions.

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4.9.1.2 Funds and Other Optional Settings Trade allowance funds are used to specify the budget for the costs of trade allowance rebates. Although funds are not a mandatory precondition for trade allowances, it is nevertheless useful to specify the monetary funds as a basis for the check of the profitability of sales promotions with rebates. You can set up trade allowance funds in the menu item Sales and marketing> Trade allowances> Funds> Funds with the applicable validity period (From date and To date) and budget amount (Fund budgeted). Before you activate the fund (change the Status to “Approved”), switch to the tab Customers and the tab Items, and enter the customers and the items that are covered by the fund. Trade allowance agreement periods (Sales and marketing> Setup> Trade allowance> Trade allowance agreement period) provide the option to specify date intervals which you can use as the default value when entering trade allowance agreements. If you want to apply an approval process for trade allowance agreements, configure the required approval workflows in the menu item Sales and marketing> Setup> Trade allowance> Trade allowance workflows.

4.9.1.3 Managing Trade Allowance Agreements Trade allowance agreements specify rebates for customers. In order to create a new agreement, open the menu item Sales and marketing> Trade allowances> Trade allowance agreements and click the button New in the action pane. Then enter a description and the validity dates (mandatory fields Order from and Order to, optionally initialized with a default from the field Trade allowance agreement period). In the field group Analysis, you have to select the Unit before you can specify the sales target of the agreement. For this target, enter the usual sales quantity without trade allowances in the field Base units, and the intended increase in the field Lift percent. The contract customers have to be specified on the tab Customers. The tabs Items and Funds in the header view of the trade allowances contain default values for the trade allowance lines. In the lines view of the agreement, the tabs General and Customers include core header data. On the sub-tab Merchandising event of the tab Agreement lines, you can enter the agreement lines with the Category (merchandising event category). The other sub-tabs contain the details of each agreement line, including the allowance calculation on the sub-tab Amounts. The fields on this sub-tab depend on the Category in the agreement line (“Bill back”, “Lump sum”, or “Off invoice”). In a “Bill back” agreement line, the Minimum quantity and Minimum amount on the sub-tab Amounts determine the required minimum sales volume within the cumulating period (selected in the field Cumulate sales by) to be eligible for deducting a rebate. The Payment type determines whether the customer receives a credit note or a payment:

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 Payment type “Customer deductions” – Credit note by a (negative) invoice to the order customer of the orders that are covered by the agreement.  Payment type “Invoice customer deductions” – Credit note to the invoice customer of the orders that are covered by the agreement.  Payment type “Pay using account payable” – Reimbursement via accounts payable by paying the vendor in the field Vend account of the agreement line or the vendor who is linked to the order customer (field Vendor account on the tab Miscellaneous details in the customer form).

Figure 4-26:

Amount calculation settings in a bill back trade allowance agreement line

The pane Trade allowance lines on the sub-tab Amounts in a “Bill back” agreement line contains the rebate calculation. The column Amount type in this pane specifies whether the number in the column Value is an amount or a percentage. You can enter multiple trade allowance lines in case the allowance percentage or amount is depending on the sales volume. The field Rebate line break type in the field group Limits determines whether the From qty and the To qty in the lines is a quantity or an amount.

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Once you have completed the trade allowance agreement, click the button Confirmed in the action pane to activate the agreement. If you have to set up multiple similar trade allowance agreements, you can create a template (Sales and marketing> Trade allowances> Templates) in a similar way to a regular trade allowance. In the template, you can click the button Create trade allowances to create a new trade allowance as a copy of the template.

4.9.1.4 Lump Sum Agreements Lump sum agreements are one-time payments or credit notes, which support sales promotion activities of customers or vendors. In order to set up a lump sum agreement, enter an agreement line in a trade allowance agreement as described above, but with the Category “Lump sum”. In a lump sum agreement line, the subtab Amounts contains the core fields Amount (for the claim amount) and Payment type (customer credit note or reimbursement as a vendor payment). Once you have set the status of the trade allowance agreement to “Confirmed”, you can click the button Approve in the toolbar of the sub-tab Amounts to credit or pay the rebate (depending on the Payment type in the agreement line):  Payment type “Customer deductions” or “Invoice customer deductions” – Credit note to the customer in the field Pay to of the agreement line (offset account is the expense account specified in the trade allowance parameters).  Payment type “Pay using account payable” – Reimbursement by a vendor invoice with the vendor in the field Pay to (offset account from the procurement category specified in the trade allowance parameters). You can view the posted customer or vendor invoice for the rebate in the open transactions of the particular customer or vendor.

4.9.1.5 Processing Bill Back Agreements Rebate claims from a bill back agreement (trade allowance agreement line “Bill back”) are based on sales invoices with the customers and the items that are specified in the agreement. The rebate claims are immediately created when posting a sales invoice if the slider Rebates at invoicing on the tab Rebate program/Invoicing in the accounts receivable parameters is set to “Yes”. If this slider is set to “No”, you have to execute the periodic activity Sales and marketing> Customer rebate> Rebate update> Calculate rebates to create rebate claims. Rebate claims, which refer to a bill back agreement, are shown in the bill back workbench (Sales and marketing> Trade allowances> Bill back workbench). At the end of each cumulating period (given by the field Cumulate sales by on the sub-tab Amounts of the trade allowance agreement line), the rebate amounts need to be cumulated based on the period revenue. This cumulation can be done with

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the button Cumulate in the workbench or with the periodic activity Sales and marketing> Customer rebate> Rebate update> Cumulate rebates. Once the rebates are cumulated, you can approve them. Select the lines for approval in the grid of the workbench and approve the rebates with the button Approve. Then click the button Process to generate rebate transactions. Processing sets the rebate status to “Mark” and posts accrual transactions. For a trade allowance agreement line with the cumulating period “Invoice” (field Cumulate sales by on the sub-tab Amounts) and the slider Approval required (on this sub-tab) set to “No”, all rebate claims are processed immediately. There is no need to cumulate, approve, and process the claims.

Figure 4-27:

Executing the cumulate calculation in the bill back workbench

You can credit or pay a rebate claim in the open transactions of the customer who receives the rebate. In order to access the open transactions, click the button COLLECT/Settle/Settle transactions in the customer form. In the Settle transactions dialog that is shown next, click the button Functions/Bill back program to open the rebate form in which you select the checkbox Mark in applicable rebate lines. Then click the button Functions/Create credit note to create a sales credit note, or the button Functions/Pass to AP to create a vendor invoice that is included in the next payment proposal. Once you have created the sales credit note or vendor invoice, the status of the related rebate claim is “Completed”.

4.9.1.6 Canceling and Purging Rebates If there is a rebate claim from a trade allowance agreement which you do not want to pay or credit, you can cancel the rebate claim after processing it (in the status “Mark”). Click the button Cancel in the bill back workbench for this purpose and enter an appropriate filter in the related dialog. Canceling sets the status of the rebate claim to “Canceled” and reverses the accrual transactions. In order to clean up the bill back workbench, you can click the button Purge in the bill back workbench. Purging deletes all transactions that are finished (status “Completed” or “Canceled”).

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4.9.1.7 Deductions and One-Time Promotions You can use trade allowance deductions if a customer only pays a reduced amount for an invoice and indicates the deduction because he does not want to wait for the rebate payout at the period end. Following setup is required as a prerequisite for deductions:  Deduction journal name – Select a journal name (used for the posting of deductions) in the trade allowance parameters.  Deduction types (Sales and marketing> Trade allowances> Deductions> Deduction types) – Create at least one type with the related offset account in the menu item.  Deduction denial reasons (Sales and marketing> Trade allowances> Deductions> Deduction denial reasons) – If you deny deductions, a reason code is required. Deductions are recorded together with the customer payment in a payment journal (Accounts receivable> Payments> Payment journal, see section 9.3.3). Enter a payment journal line which does not fully match the invoice amount in this case and click the button Deductions in the toolbar of the tab List in the journal lines. In the deduction form that is shown next, insert a new line with the deduction type, the deduction amount, and the trade allowance ID. The fields in the field group Balance at the bottom of the deduction form show the balance of settled amount, payment, and deduction. After closing the deduction form, the payment journal shows an additional line with the deduction. Posting the payment journal generates a separate transaction for the payment and for the deduction. You can manage open deductions in the deduction workbench (Sales and marketing> Trade allowances> Deductions> Deduction workbench). When you select a deduction line in the upper pane of the workbench, the open transactions (credit notes generated in the trade allowances process) for the related customer are shown in the lower pane. In order to match a deduction with a credit transaction in the deduction workbench, select the checkbox Mark in the appropriate deduction first, and mark applicable rebate transactions in the lower pane afterward. Then click the button Maintain/Match to post the match transaction. In case a customer has applied a deduction incorrectly, click the button Maintain/ Deny in the action pane of the deduction workbench to reverse the deduction. The denied amount is shown as open customer transaction then. The button Maintain/Split provides the option to split a deduction line – for example if you want to deny only part of the deduction. A one-time deduction enables the deduction of an amount which exceeds the trade allowance agreement. You can post it with the button Maintain/Settle deduction as one-time promotion in the workbench. The one-time promotion is posted as a lump sum transaction (as additional promotion) with the trade allowance template that is selected as One-time promotion template in the trade allowance parameters.

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4.9.1.8 Analyzing Trade Allowance Agreements In the trade allowance agreement form, you can click the button Analysis in the action pane to get an overview of the results of a trade allowance agreement. Detailed transactions related to an agreement are shown in the menu item Sales and marketing> Trade allowances> Trade allowance analysis> Trade allowance activity.

4.9.1.9 New in Dynamics 365 Compared to Dynamics AX 2012, trade allowance management is not a separate module but included in the sales and marketing module. Minor additional changes include the option to apply sales tax/VAT to all trade allowance types.

4.9.2

Broker Contracts

Broker contracts are agreements with agents (set up as vendors), which require to pay the agent based on the sales volume with selected customers and items.

4.9.2.1 Required Setup for Broker Contracts As a prerequisite for broker contracts, you have to set up at least one charges code (Ledger – Ledger) for broker charges in the sales charges (Accounts receivable> Charges setup> Charges code). This code is used for posting the broker charges ledger transaction when posting a sales invoice. In the Accounts payable parameters, select a procurement category for broker claim expenses and applicable journal names on the tab Broker and royalty/Brokerage. A number sequence for the Broker claim invoice is required on the tab Number sequences of the parameters.

4.9.2.2 Entering and Processing Broker Contracts Since the broker is a vendor, the broker contracts are included in the accounts payable module (Accounts payable> Broker and royalties> Broker contracts). When you set up a broker contract, select the broker and a default for the Charges code and the Category in the upper pane of the form. In the lower pane, specify the items and customers which are covered by the broker agreement. The Break type and Break in a line determine the minimum quantity or amount which is required to apply a broker charge. Depending on the Category in the line, the Charges value is a percentage or an amount. You can enter multiple lines in the lower pane in case there are charges which depend on the sales quantity or amount. When you are finished, select the option “Approved” in the column Status of the upper pane to activate the contract. In a sales order line which is covered by a broker contract, you can view the calculated broker commission with the button Sales order line/Broker commission in the toolbar of the order lines. The button Financials/Maintain charges in the sales order line provides access to the related charges transaction. Posting the sales order invoice generates an accrual (based on the charges transaction) and a broker claim.

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In the broker claims (Accounts payable> Broker and royalties> Broker claims), you can view the claims which are generated from sales invoices. In order to pay a claim, make sure that the checkbox Mark is selected in the applicable lines and click the button Approve. The approval is posting a reversal of the accrual and a new vendor invoice with the broker expense.

4.9.3

Royalty Agreements

Royalty agreements in Dynamics 365 support contracts with royalty owners (set up as vendors), which require to pay a fee (e.g., a license fee) to the royalty owner based on the sales volume with selected items. Royalty contracts work similar to vendor rebate agreements, but they are based on the customer invoice transactions covered by the royalty agreement. The required setup for royalty contracts in the accounts payable parameters includes settings on the tabs Broker and royalty and Number sequences. Based on the royalty contracts, which you enter in the menu item Accounts payable> Broker and royalties> Royalty agreements, you can process the claims in the menu item Accounts payable> Broker and royalties> Royalty claims.

4.9.4

Vendor Rebates

Rebate and trade allowance agreements are not only available in the sales module. You can also manage rebate agreements with vendors in Dynamics 365. Vendor rebate agreements (Procurement and sourcing> Vendor rebates> Rebate agreements) have to be entered in a similar way to customer rebate agreements and trade allowance agreements. You can process the claims subsequently in the menu item Procurement and sourcing> Vendor rebates> Rebate claims. The required setup for vendor rebate agreements includes the procurement and sourcing parameters (tab Rebate program) and setup forms in the menu folder Procurement and sourcing> Vendor rebates.

5

Production Control

The primary responsibility of production control is to manufacture finished products. In manufacturing, materials and resource capacity (men and machinery) are consumed.

5.1

Business Processes in Manufacturing

Depending on the requirements in your enterprise, you can apply the following manufacturing concepts in Dynamics 365:  Discrete manufacturing – Core production functionality with bills of materials (BOMs), resources, routes, and production orders.  Process manufacturing – Covers the additional requirements of batchproducing industries like formulas and batch production orders.  Lean manufacturing – Covers production flows and Kanbans (completely independent of routes and production orders). You can apply the concepts in mixed mode and, for example, use process manufacturing for components and lean manufacturing for finished products. This book addresses the core functionality in discrete manufacturing and gives an overview of process manufacturing. Before we start to go into details, the lines below give an overview of the processes in discrete manufacturing.

5.1.1

Basic Approach

Like in purchasing and sales, correct master data are an essential prerequisite for order processing in production control.

5.1.1.1 Master Data and Transactions in Production Control The released product record contains the main characteristics of an item. The bill of materials (BOM) reflects the structure of a finished (or semi-finished) item with a list of components (materials, or lower-level semi-finished items). Resources (machines or human resources) are another basic element – they provide the required capacity for manufacturing. Routes and operations, which describe the activities to manufacture an item, determine which resources are required. Products, BOMs, resources, and routes are master data, which are created once and only occasionally updated later. In the course of production order processing, default values from the master data initialize the planned and actual production orders (transaction data). You can override the data in the transaction – e.g., if you need a non-standard bill of materials in a particular production order. Figure 5-1 below shows the main steps in production order processing. © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_5

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Figure 5-1:

5 Production Control

Production order processing in Dynamics 365

5.1.1.2 Demand and Supply Planning In order to know the required quantity of finished products, master planning (see section 6.3) usually is the first step in the manufacturing process. Depending on the settings for scheduling, the item demand is based on sources like forecasts, sales quotations, sales orders, or settings for a minimum stock.

5.1.1.3 Entering Production Orders Master planning generates planned production orders, which you can transfer to actual production orders. Apart from transferring planned orders, there are other options to generate a production order:    

Manual – Enter an order in the production order form. Planned production order – Transfer a planned order. Sales order – Create a production order from a sales order line. Pegged supply – Automatically creates a production order for a semi-finished product (sub-production order) from the production order of a finished product.  Project – Create a production order from a project (project accounting module). A production order consists of an order header, which contains the manufactured item, and order lines. Unlike purchase orders or sales orders, which only include lines with items, production orders contain two types of lines: BOM lines with items and route operations. These different line types are shown in separate forms. After creating a production order, you have to complete all subsequent steps – from estimating to ending – one after another. But depending on parameter settings, you can skip steps when processing a production order.

5.1.1.4 Estimating and Scheduling Once you have created a production order, estimating is the first step in order processing. The estimation determines the quantity and the cost of all items and resources which are required to manufacture the product. Whereas estimating calculates the item and resource demand without a date or time, scheduling as the next step determines exact production dates.

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5.1.1.5 Releasing and Starting Releasing a production order means to hand it over from the front office to the shop floor. At this stage, you can print the production papers as required. Once you start the activities on the shop floor, you have to set the order status to “Started”. You can’t consume items or resources before the order has got this status. When starting an order, you can print the picking list and post the automatic consumption of items and resource capacity.

5.1.1.6 Production Journals In the manufacturing process, the shop floor consumes materials and resource capacity. This consumption is reported in production journals. Depending on the requirements, you can post the journals manually or backflush automatically (with the data from the estimation). Alternatively, you can report the consumption on terminals and mobile devices in the Dynamics 365 Manufacturing execution.

5.1.1.7 Reporting as Finished and Ending Once you have produced a partial quantity or the entire quantity of the manufactured item, post a “Report as finished” transaction. Reporting as finished increases the physical inventory of the manufactured item. Ending the production order is the last step in production order processing. It calculates the actual costs of production and posts financial transactions to the general ledger.

5.1.1.8 Ledger Integration and Voucher Principle Production journals, which record the consumption of materials or resources and the receipt of manufactured items, post physical transactions to the general ledger already before ending the order (see section 9.4.3). The voucher principle, which is the general principle for processing transactions in Dynamics 365, also applies to transactions in manufacturing: You have to register a transaction in a journal before you can post it.

Figure 5-2:

Transactions and posted documents in production control

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5.1.2

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At a Glance: Production Order Processing

The following example demonstrates the main steps in production order processing. It starts with creating the order in the workspace Production floor management and shows how to post all transactions directly in the production order form. Alternatively, you can create the order the production order list page. In the workspace Production floor management, click the button Create new/Production order in the action pane to create an order. The Create production order dialog is shown next, in which you have to select the Item number of the manufactured item. The quantity, the BOM, and the route in the production order is initialized with default values from this item. Click the button Create in the dialog to create the production order with these data finally. If the production order detail form is in read mode, click the button Edit, or press the F2 key, to switch to the edit mode. If you want to view or edit the BOM or the route of the order, click the button PRODUCTION ORDER/Order details/BOM (or PRODUCTION ORDER/Order details/Route) in the action pane.

Figure 5-3:

Managing a production order in the production order form

In order to process the production order, change the order status with following buttons in the action pane one after another:  PRODUCTION ORDER/Process/Estimate  SCHEDULE/Production order/Schedule operations or …/Schedule jobs  PRODUCTION ORDER/Process/Release

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When changing the status, you can select applicable parameters on the first tab (or on the tab General) of each update dialog – for example, if you want to select the scheduling direction when scheduling, or to print the production papers when releasing. If you skip a step, it is automatically executed with the next step. Once you want to process the production order on the shop floor, start the order with the button PRODUCTION ORDER/Process/Start. Starting posts automatic material and route consumption as applicable. In addition, you can print the picking list. In order to record the consumption of items with the flushing principle “Manual”, click the button VIEW/Journals/Picking list in the production order. If you want to generate a proposal with picking list lines, click the button Picking list/Create lines in the journal list page. In the Create lines dialog that is shown in this case, select the option “Remaining quantity” in the lookup field Proposal to initialize the journal lines with the open quantity. In the lines view of the journal detail form (shown automatically after generating the proposal, or manually with a click on the journal ID shown as a link in the list page), you can edit the quantity, the warehouse, and other data before you post the journal with the button Post. Depending on the setup and on the scheduling type (Operations scheduling or Job scheduling) which you have selected when scheduling the production order, you can enter the actual working time consumption either at route level or at job level (click the button VIEW/Journals/Route card or VIEW/Journals/Job card in the order). In route card journals and job card journals, there is no proposal which initializes the lines with default values when you manually enter a journal. Click the button New in the route card (or job card) journal and select the journal name in the Create production journal dialog before you close the dialog with the button OK. In the lines view of the journal detail form that is shown next, enter one or more lines with the date, operation/job number, resource, hours, and good quantity before you click the button Post.

Figure 5-4:

Picking list journal page with a journal which is not yet posted

In order to receive the manufactured item in inventory, click the button PRODUCTION ORDER/Process/Report as finished in the production order. If you want to ignore missing consumption postings, set the slider Accept error on the tab General of the update dialog to “Yes”. Once all transactions of the production order are posted, close the order with the button PRODUCTION ORDER/Process/End.

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Product Management and Bills of Materials

All items, which are involved in the manufacturing process, have to be recorded in the shared and the released products. Apart from inventoried items like finished products, semi-finished products, and raw materials or parts, product records are also required for phantom items or purchased services. The bill of materials (BOM) specifies the materials which are included in a manufactured item. You can assign one or multiple bills of materials to one item, but you can also assign one common bill of materials to multiple items. A single item is assigned to multiple bills of materials, if the applicable bill of materials is, for example, depending on the lot size or on the production date. For a product with variants, the product subtype “Product master” needs to be selected in the shared product (see section 7.2.1). This product subtype is a prerequisite for items which are configured to customer request. Depending on the requirements, the “Constraint-based configuration” (with product configuration models) or the “Dimension-based configuration” (with configuration groups) is used for the configuration.

5.2.1

Product Data in Manufacturing

The shared product form (Product information management> Products> All products and product masters) and the released product form (Product information management> Products> Released products) include all finished products, semifinished products, and raw materials or parts. You can also use the workspace Released product maintenance to manage the released products. You can find a general description of product management in Dynamics 365 in section 7.2 of this book. The following section contains an explanation of the product data which are necessary for production control. Except for the product type and the product subtype, which are specified in the shared product, these data are included in the released product. Product change cases (see section 10.5.2) are an option to collect multiple products which are affected by a change. In a product change case, you can validate, approve, and activate all related bill of materials and route versions in common.

5.2.1.1 Item Model Group, Production Type and Default Order Type With regard to production control, a core setting for items is the Item model group on the tab General in the released product detail form. All items which are used in production control – including finished products, semi-finished products, and raw materials or parts – have to be linked to an item model group for stocked products (see section 7.2.1). Since this type of item model groups is also required for BOMlines with non-inventoried items (e.g., subcontractor work), select the Product type “Service” in the shared product records of non-inventoried items that you want to include in a BOM (in this way you can avoid inventory control for these items).

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In the lookup field Production type on the tab Engineer, select the option “BOM” for finished or semi-finished products. With the production type “Formula” or “Planning item”, you can assign a formula (related to process manufacturing) instead of a BOM to the item. The production type “None” prevents assigning a BOM to the item. This means you can only purchase the item, not produce it. But you can also purchase an item with another production type. The reason is that the default order type – and not the production type – determines the primary sourcing strategy for the item. The field Default order type, which controls item sourcing, is shown on the tab General in the default order settings. In order to access the default order settings, click the button MANAGE INVENTORY/Order settings/Default order settings in the released product form. There are the following options for the default order type:  Purchase order – Purchase orders are used to supply the item.  Production – Production orders are used to supply the item.  Kanban – Kanbans (lean manufacturing) are used to supply the item. If you need to override the default order type at the level of a particular site, warehouse, or another inventory dimension, click the button PLAN/Coverage/Item coverage in the released product to open the item coverage form. On the tab General in the item coverage, you have to select the checkbox Change planned order type before you can select a dimension-specific order type in the field Planned order type.

5.2.1.2 Settings for Quantity and Price Apart from the default order type on the tab General, the tab Inventory in the default order settings contains additional data for production orders – including default values for lot size (field Multiple) and order quantity (field Standard order quantity). You can override the default order settings at the company level (which is the record with a blank Site) with order settings at the site level (in additional records with the respective Site). On the tab Manage costs in the released product form, the field Price specifies the general cost price of the item. In the item price form, which you can access with the button MANAGE COSTS/Set up/Item price in the released product, you can register site-specific cost prices (see section 7.3.3). If the item model group of the released product applies the valuation model “Standard cost”, you have to activate a cost price with a costing version related to the costing type “Standard cost” in the item price form.

5.2.1.3 Phantom Items The slider Phantom on the tab Engineer in the released product detail form determines the default for the Line type when inserting the item as a component in a BOM line. Phantom items are semi-finished products with a bill of materials and (optionally) a route. When you estimate a production order, BOM lines with the

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type “Phantom” are exploded. As a result, the production order contains BOM lines with the components of the phantom item (instead of a line with the phantom item itself).

5.2.1.4 Flushing Principle The Flushing principle on the tab Engineer in the released product detail form controls whether automatic consumption is posted in production orders (for the BOM lines with the respective item). There are four different options for the flushing principle:    

Start – Automatic consumption when starting the production order. Finish – Automatic consumption when reporting as finished. Manual – No automatic consumption. Available on location – Only used with the advanced warehouse management (automatic consumption when the item is available on the production input location).

In the BOM lines, you can override the flushing principle that is specified in the released product record. As a prerequisite for the automatic consumption based on the flushing principle in the released product or in the BOM line, you have to select the option “Flushing principle” in the update dialog when starting a production order or when reporting as finished (see section 5.4.3).

5.2.1.5 New in Dynamics 365 Compared to Dynamics AX 7, the Flushing principle “Available on location” is new.

5.2.2

Bills of Materials (BOM)

A bill of materials (BOM), which is a list of items, specifies the components of a manufactured item (finished or semi-finished product).

5.2.2.1 Bill of Materials Structure In Dynamics 365, the components (raw materials, parts) of a manufactured item are not directly assigned to the product, but to a bill of materials. This bill of materials is then separately assigned to the manufactured item (see Figure 5-5). The assignment of a BOM to a manufactured item is called “BOM version” in Dynamics 365. You can assign one or more BOMs to a manufactured item. Items in a BOM line may consist of other items and therefore refer to a lower-level BOM. Such items are semi-finished items. Semi-finished items establish a multilevel product structure. The BOM level (Costing level and Planning level on the tab Engineer of the released product detail form) shows the number of product levels between the selected product and the final finished product. Products, which are not a component in any BOM, show the level “0”. Semi-finished products, which are only included in

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the most upper-level BOM of finished products, show the level “1”. If a product is a component in the BOMs of multiple finished products, the BOM level in the released product shows the deepest level (highest level number) in any applicable BOM structure.

Figure 5-5:

Example of a multi-level product structure with BOMs and BOM versions

The BOM level is important for master planning (calculates the demand for finished products first, because this demand determines the demand for lowerlevel components) and for the periodic cost calculation (calculates lower-level component prices first, which enables the use of already updated prices for upper levels). You can update the BOM level with the periodic activity Product information management> Periodic tasks> Recalculate BOM level. In addition, the BOM level is recalculated in parallel with other relevant periodic tasks. In order to make use of a bill of materials in production control, the BOM and the BOM version have to be approved. In addition, the BOM version has to be activated if it should be used as the default value in production orders and in master planning. An active BOM version for an item has to be unique per date, from-quantity, and site.

5.2.2.2 Entering Bills of Materials and BOM Versions You can access the bills of materials in the following way:  From the released product (Product information management> Products> Released products, button ENGINEER/BOM/BOM versions)  From the menu (Product information management> Bills of materials and formulas> Bills of materials) The workspace Product readiness for discrete manufacturing is another place, from which you can access (use the link Bills of materials on the very right) and create

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(click the button NEW/BOM in the action pane) bills of materials. The BOM form accessed from the workspace and accessed from the menu is the same. Although the BOM form (accessed from the menu or the workspace) and the BOM version form (accessed from the released product) update the same BOM and BOM version data, the functionality and the structure of these forms is different. Since understanding the data structure is easier if you start from the menu, the lines below first explain the BOM form in the menu. If you open the menu item Product information management> Bills of materials and formulas> Bills of materials, a list page with all bills of materials is displayed. Click on a BOM ID shown as a link in the grid of the list page to open the related detail form in the lines view. The lines view of the BOM detail form shows the BOM lines. The BOM versions (assignment of manufactured items to the BOM) are shown in the header view, which you can access with the button Header (below the action pane) in the detail form.

Figure 5-6:

BOM versions tab in the BOM form header view (accessed from the menu)

In order to create a new bill of materials, click the button New in the action pane of the BOM form. The BOM detail form then shows an empty record in the lines view, in which you enter the Name of the BOM (e.g., identical with the product name) on the tab Bill of materials header. Depending on the settings of the applicable number sequence, the BOM ID is assigned automatically or has to be entered manually. If the bill of materials is site-specific, enter the site in the field Site. If you leave the site empty, it is a common bill of materials for all sites.

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In order to assign a finished (or semi-finished) product to the BOM, switch to the header view and click the button Add in the toolbar of the tab BOM versions (see Figure 5-6). In the BOM version line, enter the Item number of the manufactured item. If the BOM assignment is only valid for a particular period, enter the From date and the To date. If the BOM assignment is depending on the lot size, enter a From qty. And if the BOM assignment is depending on the site, enter the Site. If you want to assign the BOM to another manufactured item (which is not very common), create another BOM version.

5.2.2.3 BOM Lines In the lines view of the BOM form, you can view and edit the components (raw materials/parts, semi-finished products) which are assigned to the bill of materials. When you insert a new BOM line with the button New in the toolbar of the tab Bill of materials lines, enter at least the Item number and the Quantity of the component. The column Per series specifies the number of manufactured items that are produced with the quantity (column Quantity) of components in the BOM line – for example, 5 (Quantity) boxes (Unit) to produce 10 (Per series) manufactured items. On the sub-tab Setup of the tab Line details, select the option “Constant” in the field Consumption is (instead of the default value “Variable”) if the consumption (specified in the field Quantity) is independent of the production quantity. If you want to specify an additional consumption that covers inevitable scrap, enter a percentage in the field Variable scrap, or a fixed quantity in the field Constant scrap. In addition, you can select a Flushing principle for automatic consumption on the sub-tab Setup of the tab Line details. If the flushing principle in the BOM line is empty, the setting in the released product of the BOM line item is used. In a site-specific bill of materials, you can enter a picking warehouse in the column Warehouse of the BOM lines. In a bill of materials which is not assigned to a particular site, it is not possible to specify the picking warehouse in the BOM lines. In both cases, you can select the checkbox Resource consumption, which means that the picking warehouse in a production order is determined by scheduling. With this setting, the Input warehouse (specified in the resource group or production unit) of the resource/resource group in the route operation which consumes the BOM line is used as picking warehouse. In the Line type (on the sub-tab General of the tab Line details), which determines the supply strategy of a BOM line, you can choose between the following options:  Item – Semi-finished or purchased item, considered as demand in inventory.  Phantom – Virtual semi-finished item, replaced by its components when estimating the production order.  Pegged supply – Semi-finished or purchased item, creating a referenced subproduction or purchase order when estimating the production order.  Vendor – For subcontracting, works like “Pegged supply”.

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BOM lines with the line type “Item” are a regular demand in inventory. When creating planned production or purchase orders, master planning may group different demands (orders and warehouse replenishment proposals) according to the item coverage settings. The default order type (or the order type in the item coverage) controls, if master planning creates a planned purchase order, planned production order, or Kanban. There is no direct link between the order with the semi-finished product and the original production order with the upper-level finished product. Production order scheduling and master planning calculate the item demand in a way that all components have to be available at the start date of the production order. If this is not necessary for some components because they are required at a later stage, you can assign components to the respective route operation (enter the operation number in the BOM line for this purpose). Available operation numbers are depending on the route which is assigned to the manufactured item. For this reason, the field Oper.No. on the sub-tab General of the tab Line details only got a lookup functionality in the BOM version form which you access from the released product. Instead of entering all lines in a BOM from scratch, you can copy an existing BOM, which is similar to the new BOM, with the button BILL OF MATERIALS/Maintain/Copy in the BOM form.

5.2.2.4 Approving and Activating Bills of Materials In a production order, you can only use approved BOM versions. As a prerequisite for approving a BOM version, the BOM itself has to be approved. You can approve a BOM with the button BILL OF MATERIALS/Maintain/Approval in the action pane of the BOM form. Next, you can approve the BOM version – click the button Approve in the toolbar of the tab BOM versions in the header view of the detail form. If you approve the BOM version before you approve the BOM itself, an additional slider, which enables to approve the BOM and the BOM version in parallel, is displayed in the Approve version dialog. If you want to use a particular bill of materials as default for production orders, for the item price calculation, and for master planning, activate the BOM version with the button Activate in the toolbar of the tab BOM versions. Active BOM versions show a checkmark in the column Active and have to be unique per date, fromquantity, and site. In order to support approval and activation, the workspace Product readiness for discrete manufacturing includes the list Missing active BOM versions. This list shows items with the default order type “Production” but no active BOM version. If you need to approve and activate multiple bills of materials in parallel, you can use product change cases and collect them in a case (see section 10.5.2).

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You can remove the activation and the approval if required. For this purpose, click the button for approval or activation again. When you remove an approval, set the slider Remove approval in the dialog to “Yes”.

5.2.2.5 Bills of Materials in the Released Product Apart from the menu item for bills of materials, you can also use the released product form to access the bills of materials. Select an item with the Production type “BOM” in the released product form and click the button ENGINEER/BOM/BOM versions to open the BOM version form. This form shows the bills of materials which are assigned to the selected item.

Figure 5-7:

Working in the BOM version form (accessed from the released product)

In the rare case that a bill of materials is assigned to multiple items, keep in mind that modifying the bill of materials in this form also affects the other items with a BOM version assignment to this BOM. The BOM version form (see Figure 5-7) has got a different structure than the BOM form accessed from the menu: Instead of a header view and a lines view, there is a tab BOM version (with the fields of the BOM version) and a tab Bill of materials lines (with the BOM lines of the BOM which is assigned to the BOM version). If you want to enter a new bill of materials in this form, click the button New/BOM and BOM version in the action pane. In the Create BOM dialog, enter the Name of the BOM and, in case the bill of materials is site-specific, the Site. Then close the dialog with the button OK and enter the components on the tab Bill of materials lines of the BOM form which is shown next. Once you have completed the BOM lines and closed the BOM form, the BOM is shown in the BOM version form. In the BOM version form, you can edit the details of a BOM line in a separate dialog that you access with the button Edit in the toolbar of the tab Bill of materials

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lines. If you want to access the BOM form from the BOM version form, click the button BILL OF MATERIALS/Maintain BOM/Bill of materials. You can approve a BOM version in the BOM version form with the button BOM VERSION/Maintain BOM version/Approve (if necessary, set the slider to approve also the BOM itself in the dialog to “Yes”). With the button BOM VERSION/Maintain BOM version/Activate, you can subsequently activate the BOM version. Note: Use the button New/BOM version in the BOM version form if you want to assign the item to an existing bill of materials (which only creates a BOM version).

5.2.2.6 BOM Designer The BOM designer is an alternative option for viewing and editing BOMs and BOM versions. You can access the BOM designer with the button ENGINEER/BOM/ Designer in the released product form, or with the button BILL OF MATERIALS/ MAINTAIN/Designer in the BOM form.

Figure 5-8:

Working with the BOM designer

The BOM designer shows a multi-level structure of the bill of materials in the list pane on the left, and related detail data on tabs on the right. In the action pane of the BOM designer, there are buttons to edit, insert, and delete BOM lines and to create new bills of materials (together with the related BOM version). On the tab Route operations, you can select the checkbox Component needed at to assign a BOM line to a route operation (which is a way to enter the Oper.No. in a BOM line). If you want to change the display settings in the BOM designer, click the button Setup in the action pane. In the Setup dialog that is shown next, select the fields which you want to view in the left pane of the BOM designer (e.g., the quantity).

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The button Filter in the BOM designer provides access to a dialog, in which you can select the BOM/BOM version that you want to view. If you select the Display principle “Selected/Active” (or “Selected”) in the filter dialog, you can view a BOM version, which is different from the active BOM version for the selected site, date, and quantity. In order to select a BOM version for the display principle “Selected”, click the button BOM/BOM versions in the BOM designer to access the BOM versions selection form. In this form, highlight the BOM version which you want to view and click the button Select before you close the form.

5.2.2.7 Block BOM for Editing Depending on the setup, you can update an approved bill of materials at any time. In some industries, it is required to protect an approved BOM against any changes. For this purpose, there are the following settings in the inventory management parameters (Inventory management> Setup> Inventory and warehouse management parameters, tab Bill of materials):  Block editing – If this slider is set to “Yes”, no changes are possible once a BOM is approved (remove approval and re-approve afterward in this case).  Block removal of approval – If set to “Yes” in parallel to Block editing, you can’t change a BOM once it is approved. You can always update the data in the BOM version record (e.g., the From date and the To date), no matter if editing is blocked for the bill of materials itself.

5.2.2.8 Where-Used The bill of materials shows the components of an item. If you want to know for a component, in which finished or semi-finished products it is included, you can use the where-used form. Select the respective item (component) in the released product form for this purpose and click the button ENGINEER/BOM/Where-used. If you need the where-used information across multiple BOM levels, run the report Product information management> Inquiries and reports> Bill of materials where-used.

5.2.2.9 New in Dynamics 365 Compared to Dynamics AX 2012, the BOM form has been redesigned (with a list page, header view, and lines view). In the BOM designer, drag and drop features are not available as a result of the browser-based user interface.

5.2.3

Case Study Exercises

Exercise 5.1 – Components Your company wants to manufacture a new finished product which consists of two components. Create these components in the released product form – an item with the product number I-##-C1 and the name “##-Component 1” (## = your user ID) and an item with the number I-##-C2 and the name “##-Component 2”. Variants

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and serial/batch numbers are not required. Inventory control is at the level of site and warehouse. For both items, choose proper settings for the product type, product subtype, dimension groups, item group (raw materials/parts), and production type. The item model group should refer to the inventory model “FIFO”. Approved vendors are not required. The base purchase price and the base cost price for both items are USD 100. Your vendor of exercise 3.2 is the main vendor for the items and the flushing principle is “Manual”. For purchasing and inventory, enter the main site and the main warehouse in the Default order settings. Note: If the number sequence for product numbers is set up for automatic numbering, don’t enter a product number. Exercise 5.2 – Finished Product For the finished product, create an item with the product number I-##-F (if no automatic number sequence applies) and the name “##-Finished product” in the released product form. Variants and serial/batch numbers are not required. Inventory control is at the level of site and warehouse. Select applicable settings for the product type, product subtype, dimension groups, item group (finished product), and production type. The item model group should refer to the inventory model “FIFO”. The base cost price is USD 500, and the base sales price is USD 1,000. In the Default order settings, make sure that the appropriate Default order type is selected and enter the main site and the main warehouse in the settings for inventory and sales. Exercise 5.3 – Bill of Materials Once the item records for the finished product and its components are set up in the previous exercises, you can enter the bill of materials for the item of exercise 5.2. Create a site-specific BOM for the main site with two units of the first and one unit of the second item of exercise 5.1. Components should be picked from the main warehouse. Once you have completed the BOM lines, approve and activate the BOM version.

5.3

Resource and Route Management

Resources include operating personnel, machines, tools, working places, and vendors (subcontractors). They are the basic elements that execute the operations and that provide the available capacity in manufacturing. Scheduling and master planning match this available capacity with the capacity demand. Routes are the basis for calculating the capacity demand. They specify the necessary resources and the working time for producing a particular item.

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Along with items and bills of materials, resources and routes are the second area of master data that are required for production control.

5.3.1

Working Time Calendars and Templates

The working time calendar of a resource or resource group determines the hours of operation. You can manage the working time calendars in the calendar form (Production control> Setup> Calendars> Calendars).

Figure 5-9:

Editing the working times in the calendar

If you need a new calendar (for example if a resource has working times which do not match any existing calendar), insert a new record with ID and name in the calendar form. Then click the button Working times to access the working time form. The working time form shows the calendar days in the upper pane and the working hours of the selected day (with the start time and the end time in editable fields) in the lower pane. If you want to create working days and hours for the selected calendar, click the button Compose working times in the working time form. In the Compose working times dialog that is shown next, select a Working time template which determines the default values for the daily working hours. In the working time templates (Production control> Setup> Calendars> Working time templates), you specify the usual working hours per day of the week on the tabs Monday to Sunday. The base calendar is an alternative way to specify the working times. In the calendar form, you can link each calendar to another calendar by selecting this calendar in the field Base calendar of the first calendar. With this setting, you can set

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the slider Use base calendar in the Compose working time dialog to “Yes”. Dynamics 365 then initializes the column Control in the working time form with the option “Base calendar”. This option means that the working time is given by the base calendar. You can override the working times of a calendar for a day – select the option “Open” or “Closed” in the column Control for this purpose.

5.3.2

Resource Groups and Resource Management

Production units represent plants in capacity management. Within a production unit, resource groups collect the resources according to the physical organization on the shop floor. Resources within a resource group can have different capabilities and do not need to be interchangeable.

5.3.2.1 Production Units Production units, which are an optional setup for capacity management, are independent of the storage dimension “Site”, which is used in material management. They are not included in inventory transactions, but they are available for filtering and sorting purposes in the relevant production control forms (e.g., Production control> Operations> Current operations). You can link multiple production units to one common site. If you want to create a production unit, open the menu item Production control> Setup> Production> Production units and enter a new record with ID, name, and site. On the tab General, you can optionally enter an Input warehouse. This warehouse is used as picking warehouse for BOM lines in which the checkbox Resource consumption is selected (in case there is no Input warehouse in the applicable resource group). In order to link resource groups to a production unit, select the production unit in the field Production unit of the resource group form.

5.3.2.2 Resource Groups Resource groups in Dynamics 365 reflect the physical organization of resources. They are used for the following purposes:  Structuring – Resource groups are an element in the hierarchical organization structure. They link resources to production units, sites, and warehouses.  Scheduling – For capacity planning in operations scheduling, resource groups are the scheduling level. The capacity of a resource group is the total capacity of the assigned resources. Since the assignment of resources to resource groups is date effective, you can adjust the resource assignment in line with organizational and seasonal changes. At any date, a resource can only be linked to one resource group. If a resource is not assigned to a resource group on a given day, it is not available for manufacturing on that day. Resource scheduling only includes resources which are assigned to a resource group.

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If you want to edit the resource groups, open the menu item Production control> Setup> Resources> Resource groups. In order to create a new resource group, click the button New in the action pane and enter the ID, name, and site.

Figure 5-10:

Editing a resource group

On the tab Resources of the resource group form, you can manage the resources which are assigned to the resource group. In order to assign an additional resource, click the button Add in the toolbar of this tab. If you want to view past assignments or to enter an assignment with a future start date (which you enter in the column Effective), click the button View/All in the toolbar of this tab. It is not only possible to assign resources to a resource group in the resource group form, but you can also work the other way around – open the resource form and select the resource group there. On the tab General of the resource group form, you can optionally assign a production unit to the resource group. The Input warehouse on this tab specifies the picking warehouse for BOM lines with Resource consumption (see section 5.2.2). If the slider Work cell on the tab General is set to “Yes”, the resource group is used in lean manufacturing and not available for operations and production orders in discrete manufacturing. In addition, you can insert records on the tab Work cell capacity to specify the capacity for lean manufacturing in this case. Settings on the tab Operation of the resource group comply with equivalent settings on the tab Operation in the resource form (see below). The calendar of a resource group is specified on the tab Calendars in the resource group form. The calendar assignment is date effective, which means that you can record a future change of the working times in an additional line (with the start

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date) on the tab Calendars of the resource group – for example, if you want to change the regular working times for the resource group from two shifts to three shifts. In order to show the required column Effective (for the start date), click the button View/All in the toolbar of this tab. If you need to override the working times of a resource group for a particular day, click the button RESOURCE GROUP/Maintain/Calendar deviations in the resource group and assign an alternative calendar for this day (e.g., a calendar without working times if a resource is not available temporarily).

5.3.2.3 Resources Resources are the lowest level for capacity management in Dynamics 365. They are assigned to resource groups according to the organizational hierarchy. Optionally you can assign resources to capabilities (which reflect the functional abilities). You can edit the resources in the menu item Production control> Setup> Resources> Resources. When creating a new resource, be aware that the resource ID needs to be unique – not only within the resources but also within the resource groups. You can, for example, use a three-digit ID for resource groups and a four-digit ID for resources to distinguish resource groups from resources easily. When you create a resource, you have to select the resource type in the lookup field Type in order to distinguish between the different kinds of resources:     

Machine – General default, for production machines. Human resources – Personnel (you can optionally assign a worker ID). Vendor – External resource for subcontracting (optionally assign a vendor ID). Tool – Device, often subject to wear (e.g., for a knife in a turning machine). Location – Represents physical space, not linked with warehouse locations (e.g., for a greenhouse).  Facility – Similar functionality to “Machine”, but for a group of machines and workers. If you do not need to schedule and to report the activities of a machine and its operating staff separately, you can use a common resource with the type “Facility” or “Machine”. If you want to manage tools, enter the usage of a tool as a secondary operation in routes (see section 5.3.3 below). On the tab Calendars of the resource form, you can assign a working time calendar to the resource (similar to assigning a calendar to a resource group). The calendar, together with the efficiency percentage, determines the capacity of the resource. On the tab Resource groups, you can manage the resource group to which the resource is assigned. In order to assign a resource group, click the button Add in the toolbar of this tab. If you want to view past assignments or to enter an assignment with a future start date (which you enter in the column Effective), click the button View/All in the toolbar of this tab.

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If needed, you can assign multiple resources to a resource group in a single step: Select the resources in the resource form, then click the button RESOURCE/ Maintain/Add to resource group in the action pane and select the applicable resource group in the drop-down dialog.

5.3.2.4 Resource Capacity and Operation Settings The capacity of a resource is given by its working time calendar and efficiency percentage. For a resource group, the capacity is the total capacity of its resources. In the capacity load form, which you can open with the button RESOURCE/View/ Capacity load in the resource form, you can view the totals of available capacity and capacity reservation per day. For resource groups, a similar inquiry is available in the resource group form.

Figure 5-11:

Managing the capacity and operation settings of a resource

The unit of time for scheduling a resource is hours. If a different unit of time is required for a resource, enter a conversion factor in the field Hours/time on the tab

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Operation of the resource form. If you want to specify the time in route operations in minutes, enter 1/60 = 0.0167 in the Hours/time. If the unit of measure for a particular resource is not a unit of time, you can select an alternative Capacity unit (e.g., “Strokes/hour”) on the tab Operation. The field Capacity then contains the conversion factor to hours. In the related route operations, select the option “Capacity” in the field Formula on the tab Setup. With the field Efficiency percentage on the tab Operation of the resource form, you can adapt the scheduled time for route operations by a factor. The default for the efficiency percentage is 100. If, for example, a particular resource is 25 percent faster than a standard resource, enter 125 in the efficiency percentage. With this setting, the scheduled time of a route operation with 10 hours (for other resources) is only 8 hours (= 10 * 100/125) on this resource. The slider Finite capacity on the tab Operation controls, whether capacity reservations of other production orders reduce the available capacity when you schedule an order. If this slider is set to “Yes”, only one operation at a time is scheduled on this resource. Otherwise, scheduling calculates each production order separately, regardless of other orders on the same resource. In many cases, finite capacity is only used for the resources and resource groups which don’t have the possibility to increase the capacity (e.g., by overtime). In the master plan (for master planning) and in the production order update dialogs (for operations scheduling and job scheduling), you can select to disregard the finite capacity setting of the resource. The cost categories Setup category and Run time category determine the hourly rate of the resource for setup time and for run time. In the Quantity category, you can enter a quantity-depending price (if applicable). The other field groups on the tab Operation in the resource form contain fields which are default values for route operations. These defaults are used when you select the resource or resource group as costing resource in a route operation.

5.3.2.5 Resource Capabilities Resource capabilities determine the activities which a resource is able to do (e.g., welding or cutting). You can temporarily or permanently assign one or more capabilities to a resource. The capability assignment is only available for resources, not for resource groups. In the routes, you can subsequently specify the required capabilities for the individual operations (see section 5.3.3 below). In order to create a capability (shared across companies), open the menu item Production control> Setup> Resources> Resource capabilities and click the button New in the action pane. Enter the ID and description of the new capability and switch to the tab Resources. On this tab, you can assign the applicable resources to the capability.

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But it is not only possible to assign resources to a capability in the resource capability form, but you can also open the resource form and assign the capabilities to the resource with the button Add in the toolbar of the tab Capabilities. If needed, you can assign multiple resources to a capability in a single step with the button RESOURCE/ Maintain/Add capability in the resource form (select the resources first).

Figure 5-12:

Managing the resource capability assignment in the capability form

The capability assignment is date effective, which means that you can record a future change of the capabilities of a resource in an additional line on the tab Capabilities of the resource (with a start date which you can show with the View/All in the toolbar of this tab). In addition, there is the field Priority in the assignment line: Depending on the scheduling parameters (see section 5.4.1), job scheduling is searching for the applicable resource with the highest priority (this is the lowest priority number – priority “1” is selected first).

5.3.2.6 Settings for Ledger Integration The tab Ledger postings in the resource form and the resource group form contains the main accounts which are used for route consumption. When you post a route card or job card journal for a production order, the costs for the use of the resource (usually measured by the working time) are posted to the general ledger. The applicable main accounts are specified in the field group Accounts-Physical of the resource. When you cost and end a production order, ledger transactions are posted to the accounts in the field group Accounts-Financial. The ledger settings in the resource only apply, if the option “Item and resource” is selected in the lookup field Ledger posting of the production order (see section 9.4.3). If the option “Item and category” is selected, applicable main accounts are derived from the cost categories.

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5.3.2.7 New in Dynamics 365 Compared to Dynamics AX 2012, there are minor changes like the new resource type “Facility” and a separate tab for the calendar assignment in the resource form.

5.3.3

Routes and Operations

Routes determine the operations which are required to manufacture an item. In addition to the bills of materials, which contain the required material, they are the second area of the required setup for production. Like bills of materials, routes contain planned data which determine the target for production. In the course of manufacturing, the workshop reports actual figures in production journal transactions. You can subsequently compare and analyze target and actual figures to determine possible improvements. In order to describe the operations in manufacturing, a route has to contain at least the following data:      

Activity – Specified in the field Operation. Resource – Specified on the tab Resource requirements. Sequence of operations – Specified by the next operation (field Next). Time consumption – Specified in the fields Setup time and Run time. Manufactured item – Specified by the Item number in the route version. Required material – Specified in the BOM lines, optionally linked to operations.

If the workshop does not need all components of the bill of materials when starting the first operation, you can link BOM lines to the applicable route operations (see section 5.2.2).

5.3.3.1 Setup of Operations As a prerequisite for routes, you have to set up operations (Production control> Setup> Routes> Operations). You can use one operation in multiple routes. Operations are separate from routes and only contain a unique ID and a name. Other details which are necessary to execute an operation (e.g., the expected time/duration, or the required resource) are not included in the operation record itself, but in the operation relations. In order to view and to edit the details of an operation (specified in the operation relations), click the button Relations in the operation form. Depending on the requirements, you can enter the operation relations at a general level or at a routespecific level:  General – For operation details at a general level, select the option “All” in the field Item code and Route code of the operation relation (see Figure 5-13).  Route-specific – Route-specific operation details contain the option “Route” in the Route code and the route number in the field Route relation.

5.3 Resource and Route Management

Figure 5-13:

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Managing general operation relations for an operation

On the other tabs of the operation relation form, you can enter the details of the particular operation relation (including applicable resources and times). You can find more details on operation relations in the explanation of route operations further down this section.

5.3.3.2 Operation Sequence The sequence of operations is not specified in the operations, but in the route. There are two types of operation sequences:  Simple sequence – One operation after the other.  Complex sequence – Multiple predecessor for an operation possible. Simple operation sequences are used, if the slider Route network (on the tab General of the production control parameters) is set to “No”. In this case, routes only contain operations that are executed one after another.

Figure 5-14:

Example of a simple operation sequence

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If the slider Route network is set to “Yes”, you have to enter the next operation in each operation of a route. This setting enables complex operation sequences with multiple independent prior operations for any route operation.

Figure 5-15:

Example of a complex operation sequence

Irrespective of the setting on simple or complex operation sequences, you can use secondary operations in routes for operations that can be executed on multiple resources in parallel (select the Priority “Secondary” in the respective route operation).

5.3.3.3 Entering Routes and Route Versions Managing routes in Dynamics 365 is similar to managing bills of materials, including the way in which you can access the route form:  From the released product (Product information management> Products> Released products, button ENGINEER/View/Route)  From the menu (Production control> All routes) The workspace Product readiness for discrete manufacturing is another place, from which you can access (use the link All routes in the pane on the very right) and create (click the button NEW/Route in the action pane) routes. The route form accessed from the workspace and accessed from the menu is the same. Although the route form (accessed from the menu) and the route version form (accessed from the released product) update the same route and route version data, the functionality and structure of these forms are different. Like the assignment of bills of materials, the assignment of routes to manufactured items is called “Version” (with the option the specify validity dates and a fromquantity). But unlike BOM versions, route versions always refer to a site. The menu item Production control> All routes opens a list page with all routes. Click on a route number shown as a link in the grid of the list page to open the related route form. The route form shows the route header on the tab General and one or more assigned manufactured items (“Versions”) on the tab Versions. In order to create a new route, click the button New in the action pane of the route form.

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Depending on the settings of the applicable number sequence, the route number is assigned automatically or has to be entered manually. Enter a Name for the new route on the tab General of the route form and switch to the tab Versions. In the toolbar of this tab, click the button Add to create a route version (assignment of a manufactured item to the route). The Site is a mandatory field in the route version.

5.3.3.4 Route Operations You can access the route operations from the route list page or the detail form with the button ROUTE/Maintain/Route details in the action pane. The route operation form then shows the sequence of the route operations in the upper pane and the operation relations (operation details) of the selected operation in the lower pane. Click the button New in the action pane if you want to insert a new route operation. If required, you can override the operation number (column Oper.No.). Then select the applicable operation (operation ID) in the column Operation. If the production control parameters specify complex operation sequences , you have to enter the number of the next route operation in the column Next of the upper pane (for the last operation, the Next number is “0”). If the shop floor should execute some operations in parallel (e.g., if the work of the machine and of the operating personnel should be reported separately), enter two or more operations with the same operation number, but with a different Priority. In the example of Figure 5-16, there are two parallel operations with operation number 30 – one with Priority “Primary” and one with Priority “Secondary 1”.

Figure 5-16:

Editing a route operation with a general operation relation (All/All)

If you want to add time and material consumption to cover inevitable scrap that is caused by the operation, enter a Scrap percentage. If there is scrap in more than one

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route operation, the total scrap is calculated by multiplication. If there is, for example, a route with two operations and each of them has got 10 % scrap, the material and resource demand for the first operation is 123 % of the regular demand without scrap (10 % scrap then cause an output of 111 %), which is subsequently reduced to an output of 100 % by the second operation. If the operation (in the column Operation) which you select in a new route operation has got a general operation relation (indicated by the option “All” in the column Route code), this general operation relation is shown in the lower pane of the route operation form when you save the record. If you override the data of a general operation relation in the route operation form (accessed from the menu), keep in mind that these changes apply to all routes which use the selected general operation relation. If you want to enter route-specific operation details (independent of a general operation relation), insert a line with a new operation relation in the lower pane of the route operation form. In the operation relation, select the option “Route” in the column Route code and enter required data on the other tabs of the lower pane.

5.3.3.5 Route Groups The Route group on the tab Overview (and the tab General) in the operation relations (the lower pane of the route operation form) controls the way in which the resource usage is posted. If the resource usage for an operation should be posted automatically (actual = estimate), select a route group with settings for automatic route consumption. You can set up the route groups in the menu item Production control> Setup> Routes> Route groups. In route groups for automatic posting, set the sliders for Setup time, Run time and Quantity in the field group Automatic route consumption to “Yes”. In addition, clear the checkboxes in the column Job management on the tab Setup for these route groups (automatic consumption is posted through route cards). The sliders in the field group Estimation and costing control, whether to include operations with this route group in estimation and cost calculation. For regular operations, set the sliders for a time-based cost calculation or the slider for quantity-based cost calculation to “Yes”. If all sliders for costing are set to “No”, Dynamics 365 only calculates the time but no costs for assigned operations.

5.3.3.6 Costing Resource and Cost Categories On the tab Setup in the operation relations, you can optionally select a resource or a resource group in the field Costing resource. Data of the costing resource initialize the fields in the field group Cost categories and the fields on the tab Times of the route operation. Cost categories are, apart from the route group, another setting which controls cost estimation and cost calculation. You can assign different cost categories for setup

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time, run time, and quantity. When you assign a cost category, make sure that the related slider in the route group (the field group Estimation and costing controls whether time or quantity are included in the calculation) is set to “Yes”. Before you can create a new cost category, you have to create a related shared category in the menu item Production control> Setup> Routes> Shared categories. Shared categories ensure common category definitions across companies. For categories in production control, set the slider Can be used in Production in the shared category to “Yes”. Cost categories for production control (Production control> Setup> Routes> Cost categories) contain three core settings:  Cost price – Determines the hourly rate (for setup time and run time).  Cost group – Classifies the cost types in the cost calculation (see section 7.3.3).  Ledger postings – The settings on this tab determine the main accounts which are used for route consumption (as a prerequisite, the lookup field Ledger in the production order has to be set to “Item and category”). If you want to enter the cost price for a category, click the button CATEGORY SETUP/Category setup/Price in the cost categories to access the cost category price form. In the cost category price form, enter a cost price with a costing version (costing versions are covered in section 7.3.3) for the category per site or – if you leave the field Site empty – at the company level. Then activate the price with the button Activate. In a production order, the (upfront) estimation applies the cost price of the cost categories in the route operation. The later calculation of the actual costs applies the cost categories of the resource in the actual transaction.

5.3.3.7 Operation Times The fields on the tab Times in the operation relations show the expected time for the operation. You can distinguish between the setup time, the run time, the queue times and the transit time. The field Run time determines the time which it takes to produce the quantity in the field Process qty. This quantity refers to the manufactured product (specified via the route version). If the Process qty. is 1.00, the run time is the required time in hours to produce one unit. If necessary, you can use other units than hours for the time: Enter a conversion factor Hours/time in the route operation or select a capacity unit in the resource (see section 5.3.2) for this purpose. The processing time of an operation is the result of the following formula:

PROCESSING TIME =

Setup time + (Run time × Quantity ) Efficiency percentage of the resource

In addition to the processing time, queue times and transit times are included in the total lead time.

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5.3.3.8 Resource Requirements and Resource Load On the tab Resource load in the operation relations, the field Quantity specifies the number of required resources (for resources that work in parallel). The calculation of required capacity then multiplies the operation time with the load quantity. As a prerequisite for the use of the load quantity, the operation relation has to apply a resource requirement with the Requirement type “Resource group”. The settings on the tab Resource requirements of the operation relations determine the resources that can execute the operation. From a functional point of view, these settings are independent of the costing resource. If there are multiple lines in the resource requirements, an applicable resource must comply with all of them. The checkboxes in the respective columns determine separate requirements for Operations scheduling and for Job scheduling. In the column Requirement type, you can select if a requirement refers to a resource group, a resource, a resource type, or a capability. The options “Skill”, “Courses”, “Certificate” and “Title” are only used for job scheduling with resources of the resource type “Human resource” (related to worker data in human resource management). If you want to review the resources that meet the requirements for a route operation, click the button Applicable resources in the toolbar of the lower pane in the route operation form. Since the assignment of resources to resource groups and to capabilities is date effective, you have to specify the date for which you want to view the applicable resources (today’s date is the default). In addition, select whether to show the resources for operations scheduling or for job scheduling. If you want to get an overview of all operations with the applicable resources, click the button Route feasibility in the toolbar of the tab Versions in the route form (not in the route operation form).

5.3.3.9 Approving and Activating Routes Like bills of materials, routes and route versions have to be approved before they are available for production orders. You can approve a route with the button ROUTE/Maintain/Approve in the action pane of the route form or list page. In order to approve a route version, click the button Approve in the toolbar of the tab Versions in the route form. If you approve the route version before you approve the route itself, a slider for simultaneously approving the route and the route version is shown in the approval dialog. If you want to use a route as the default for production orders, for item price calculations, and for master planning, activate the route version with the button Activation in the toolbar of the tab Versions. Active route versions show a checkmark in the column Active and have to be unique per date, quantity, and site. Depending on settings in the production control parameters (sliders Block editing and Block removal of approval on the tab General, similar to the settings for BOMs), you can update an approved route at any time.

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You can remove the activation and the approval if required. For this purpose, click the button for approval or activation again. When you remove an approval, set the slider Remove approval in the dialog to “Yes”.

5.3.3.10 Routes in the Released Product Apart from the menu item for routes, you can also use the released product form to access the routes. Select the respective item in the released product form and click the button ENGINEER/View/Route to open the route version form. The route version form (accessed from the released product) shows all routes that are assigned to the selected item and has got a different structure than the route form accessed from the menu: It shows the route versions in the upper pane and the route operations with the operation number and the operation relations (operation details) in the lower pane. If you want to create a new route in this form, click the button New/Route and route version in the action pane. Alternatively, click the button New/Route version (which just creates a route version and not a new route in parallel) if you only want to assign the item to an existing route. In order to insert a route operation for a route in the route version form, select the route in the upper pane and click the button New in the toolbar of the lower pane. If the operation (in the column Operation) which you select in the new route operation has got a general operation relation (indicated by the option “All” in the column Route code), this general operation relation is shown in the lower pane of the route operation form when you save the record. Unlike the functionality in the route form accessed from the menu, overriding the data of a general operation relation in this form creates a route-specific operation relation automatically – indicated by the option “Route” in the column Route code. You can alternatively click the button Copy and edit relation in the toolbar of the lower pane if you want to enter route-specific operation details which are independent of the general operation relation (same result as simply overriding data). If you want to delete a route-specific operation relation and to apply an applicable general operation relation again, click the button Delete relation in the toolbar. If there is no general operation relation for a route operation, you have to enter a new operation relation with all required data in the lower pane manually. In the route version form, you can approve a route version with the button ROUTE VERSION/Maintain route version/Approve (if necessary, set the slider to approve also the route itself in the dialog to “Yes”). With the button ROUTE VERSION/Maintain route version/Activate, you can subsequently activate the route version.

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Case Study Exercises

Exercise 5.4 – Setup for Routes In order to investigate the use of capabilities, route groups, and cost categories, you want to set up an example. As a start, create a capability C-## (## = your user ID) with the name “##-specific”. Then enter a route group R-## with settings which require a manual posting of the actual working time. Estimation and costing should only be based on setup time and run time. Next, you set up a new cost category G-## (and the related shared category) for production. In the cost category, select an appropriate cost group of your choice and enter main accounts similar to the settings in existing cost categories. For the hourly rate, enter and activate a cost price of USD 100 at the company level (select a costing version with the costing type “Planned cost”). Exercise 5.5 – Resource Groups and Resources New resources are required to manufacture the finished product of exercise 5.2. Enter a new resource group W-## with the name “##-assembly”, which is assigned to the main site and an appropriate production unit. The resource group applies the cost category of exercise 5.4 for setup time and for run time. In the resource group calendar, select a regular calendar of your choice. Then create two new resources, W-##-1 and W-##-2, with the type “Machine”. For both resources, the route group and – for setup time and for run time – the cost category of exercise 5.4 is used. Select main accounts for the resources which are similar to the settings in existing resources. Both resources are assigned to the new resource group W-##, but only the resource W-##-2 has got the capability of exercise 5.4. The resources use the same calendar as the resource group. Exercise 5.6 – Operation and Operation Relations As a prerequisite for production, a new operation is required. Create the operation O-## (## = your user ID) with the name “##-processing”. In general, the setup time for this operation is one hour and the run time is two hours per unit. Select the resource W-##-1 of exercise 5.5 as costing resource which specifies default values for the route group and the cost categories. Only resources of the resource group W-## and the capability C-## of exercise 5.4 can execute the operation. Exercise 5.7 – Route In order to manufacture the finished product, a new route which is based on the setup in the previous exercises is required. Select the item I-##-F of exercise 5.2 in the released product form and access the route from the released product. Create a new route with the operation O-## of exercise 5.6 as the only route operation. There is no setup time, and the run time for the operation is one hour per unit. The other settings in the route operation – including costing resource, route group, cost

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categories, and resource requirements – are the same as the applicable settings in the general operation relation which you have entered in exercise 5.6. Once you have completed the details, approve and activate the route and the route version. Can you check which resources can execute the route operation? Finally, check which operation relations are assigned to the operation of exercise 5.6.

5.4

Production Order Management

A production order is a request to manufacture a particular product. Apart from the item number and the quantity of the manufactured item, production orders include data on the required materials and resources. The order status, which is updated with every step in the sequential flow of order processing, shows the progress of a production order.

5.4.1

Basics of Production Order Processing

Apart from manually entering a production order, there are the following options to create an order:  Sales order – Create a production order from a sales order line.  Project – Create a production order from a project (project accounting module).  Master planning – Generates a planned production order which you firm to convert it to an actual production order (see section 6.3.4).  Pegged supply – Automatically generates a production order from the BOM line of an upper-level production order (sub-production, see section 5.4.3).

5.4.1.1 Production Order Status When you create a production order manually, the first status is “Created”. This is the only status in which you can delete a production order. If you need to delete a production order in a later status, you have to reset the status to “Created” first. The manufacturing cycle, which updates the order status, includes the following steps:       

Created – Temporary status after creating a new order. Estimated – Material and resource demand is calculated. Scheduled – Start/end dates are calculated, and resources are assigned. Released – The order is transferred to the shop floor. Started – Posting of actual consumption is possible. Reported as finished – The manufactured item is received in inventory. Ended – The order is finally closed.

The order status is updated when you process the order with the corresponding button in the production order form or with the related periodic activity in the menu folder Production control> Periodic tasks> Production order status update. You can skip steps in the order processing cycle – Dynamics 365 then automatically executes the steps which you omit (using the settings on the tab Automatic update in

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the production control parameters). If you want to reset the status of a production order, click the button PRODUCTION ORDER/Process/Reset status in the production order form. Dynamics 365 then reverses all posted transactions (automatic and manual postings) which refer to the reversed status. Settings on the tab Status in production control parameters determine from which status you can move to which status. There are different checkboxes for both directions, for skipping a status and for reversing a status.

5.4.1.2 Production Control Parameters Unlike parameter settings in other areas, production control parameters are not only available at the company level, but also at the site level. The field Parameter usage on the tab General in the production control parameters at the company level (Production control> Setup> Production control parameters) determines whether the site-specific parameters are used. You can set up the site-specific parameters in the menu item Production control> Setup> Production control parameters by site.

5.4.1.3 Scheduling Parameters Scheduling parameters (Master planning> Setup> Scheduling> Scheduling parameters) determine the default values for the update dialogs related to production order scheduling. Essential scheduling parameters include the Primary resource selection, which determines if capability-based scheduling is based on the priority or on the shortest duration. Like the production control parameters, the scheduling parameters are available at the company level and at the site level.

5.4.2

Production Order Registration

Data in a production order include the header data, the production BOM, and the production route. When you create a production order, an inventory transaction for the manufactured item with the status “Ordered” in the column Receipt is created (similar to the transaction for a purchase order line). The inventory transactions for the components of the production order (BOM lines) are only created when you execute the order estimation. As long as the status of the production order is “Created”, master planning only recognizes a supply of the manufactured item (from the inventory transaction), but there is no component demand (the corresponding inventory transactions are not created yet). For this reason, you should estimate a production order soon after creating it. If a production order is created automatically from a planned order, settings in the applicable coverage group determine the initial status (usually “Scheduled”).

5.4.2.1 Entering a New Production Order You can manually create a production order with the button Create new/Production order in the workspace Production floor management. Alternatively, open the production order form (Production control> Production Orders> All production orders) and click the button New production order in this form. In a sales order, you can click

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the button Product and supply/New/ Production order in the toolbar of the order lines to create a production order which is – with reservation and marking – linked to the sales order line.

Figure 5-17:

Creating a production order in the production floor management workspace

In the Create production order dialog, you have to select the item number of the manufactured product first. Depending on the selected item, several fields are initialized with default values which you can override as required (for example if you want to select a different BOM). Once you click the button Create in the dialog, the production order is finally generated and shows the initial status “Created”. When you process the order, it switches to a subsequent status. A summary of the status updates is shown on the tab Update of the production order detail form. You can still update the settings in a production order later – for example if you need to modify the BOM or route in the order. If you change a production order which is already estimated or scheduled, you should, in order to ensure consistent data, run the estimation or scheduling again. If the production papers have been printed already, you might need to reprint them with the updated data. For production orders, which have been created in another area of the application, the tab References of the production order detail form shows the reference to the

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origin. If the production order refers to another order, this original order is shown in the item reference type and number – for example with the reference type “Sales order” if the production order has been created from a sales order line. In a production order that is generated as sub-production for the BOM line of an upper-level production order, the item reference type is “Production line”.

5.4.2.2 Production BOM and Route Like all documents, production orders contain a header with the common data of the whole order – including the order number, the item number of the manufactured item, the order quantity, and the delivery date. But unlike sales orders or purchase orders, production orders include two different types of lines:  BOM lines – Contain the required materials.  Route operations – Contain the required operations. The production order detail form, which you can open with a click on a production order number shown as a link in the production order list page (Production control> Production Orders> All Production Orders), only shows the production order header. In order to access the BOM lines of a particular production order, click the button PRODUCTION ORDER/Production details/BOM in the action pane. If you want to access to the production BOM line details, click on the respective item number shown as a link in the production BOM lines. If you want to access the production route with its operations, click the button PRODUCTION ORDER/Production details/Route in the production order. When you create a new a production order, the production order receives a copy of the BOM and the route of the manufactured item. The order subsequently has got its own production BOM and route, which you can edit separately from the BOM and the route of the manufactured item.

Figure 5-18:

The active BOM/route version is the default for the production BOM/route

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By default, the BOM and the route which is copied into the production order is given by the active BOM and route version for the item, site, date, and quantity of the production order. The date which is used for this BOM and route selection is the BOM/route date in the Create production order dialog (the default in this field is the delivery date). If you do not want to use the active BOM or route version in a particular production order, you can select any other approved BOM or route version for the manufactured item in the Create production order dialog (e.g., an alternative BOM for subcontracting).

5.4.3

Processing Production Orders

Once you have created a production order, the next step is to update the status as a preparation for the order execution on the shop floor.

5.4.3.1 Default Values in Update Dialogs When you update the status of a production order, an update dialog is shown. In the update dialog, you can click the button Default values if you want to specify default values which are different from the standard defaults. In the default values dialog, you can optionally click the button Make default for all users to apply your customized default values to all users. The default values are stored in the Usage data, which you can access from the user options. Be aware that new users which are created later receive the standard settings (the button Make default for all users only copies to the usage data of existing users) and that resetting the usage data resets the default values.

5.4.3.2 Estimation Estimation is the first step after creating a production order. The primary task of estimation is to calculate the required material and resources capacity for the production order. The basis for this calculation is the bill of materials and the route of the order. In order to run the estimation, click the button PRODUCTION ORDER/Process/ Estimate in the production order form or execute the related periodic activity. In parallel to the calculation of the required quantities and times, estimation determines the expected costs (based on the cost price of materials and route operations). If you want to view the cost estimation subsequently, click the button MANAGE COSTS/Calculations/View calculation details in the production order form. The tab Overview estimation in the price calculation form shows the estimation lines. If you want to view a summary according to the costing sheet setup, switch to the tab Costing sheet in the price calculation form. For the BOM lines of the production order, estimation creates inventory transactions which are similar to the inventory transactions of open sales order

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lines. You can view these transactions with the button Inventory/Transactions in the production BOM form (access with the button PRODUCTION ORDER/Production details/BOM in the production order form). Since there are no inventory transactions related to BOM lines before estimation, this status is the earliest order status in which you can execute a manual or an automatic reservation (see section 7.4.5). If the Line type in a production BOM line is “Pegged supply”, estimation creates a related order:  Sub-production order (regular production order which is linked to the main production order) – For BOM lines with an item with the default order type “Production”.  Purchase order – For BOM lines with an item with the default order type “Purchase order”. For BOM lines with the line type “Phantom”, estimation replaces the production BOM line by the components of the phantom item (includes BOM and route).

5.4.3.3 Scheduling Production order scheduling includes the calculation of the exact date and time of material and resource demand and the reservation of resource capacity. In Dynamics 365, there are two types of scheduling:  Operations scheduling – At the level of resource groups and dates.  Job scheduling – At the level of resources and exact times. Depending on the setup, you can execute either operations scheduling, or job scheduling, or both (first operations scheduling, and then job scheduling). Operations scheduling is a rough scheduling process, which calculates the required time per day. Based on the resource requirements in the route operation (capabilities, resource groups, resource types), operation scheduling selects a resource group and reserves the required capacity. If the operation contains a resource requirement with the Requirement type “Resource”, operations scheduling reserves capacity on the resource (and not at group level). The available capacity of a resource group is the total capacity of its resources. Existing capacity reservations are deducted from the available capacity if scheduling is executed for finite capacity and if the slider Finite capacity in the resource group is set to “Yes”. Depending on the setting of the slider Planned order on the tab General in the production control parameters, these capacity reservations include planned orders or only include other actual production orders. Job scheduling at a later stage calculates the capacity at the level of individual resources and reserves capacity with exact start and end times. In addition to the calculation of exact start and end times, job scheduling generates jobs which split the route operations of a production order into individual tasks. These individual

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tasks show different job types, corresponding to the different time fields on the tab Times of the route operation (e.g., Setup time and Run time). The available job types for a particular operation are determined by the Route group of the operation (column Job management on the tab Setup in the route group form). Job transactions (which are generated with job scheduling) are independent of route transactions (which refer to operations scheduling). For this reason, you have to decide whether to schedule the capacity and to post the actual resource usage at the operations level or at the detailed job level. There are no job transactions in a production order if you skip job scheduling.

Figure 5-19:

Production route transactions after job scheduling

In order to execute operations scheduling or job scheduling, click the button SCHEDULE/Production order/Schedule operations or SCHEDULE/Production order/ Schedule jobs in the production order form. If you want to schedule multiple orders, execute the corresponding periodic activity in the menu folder Production control> Periodic tasks> Scheduling. On the tab Scheduling parameters of the update dialog for scheduling, the following parameters are available:  Scheduling direction – Select one of the various options of forward or backward scheduling (“Forward form today” is used in case the field is empty).  Finite capacity and Finite material – Observes resource or item availability.  Keep warehouse from resource – Only a resource, which is assigned to the same input warehouse as the original resource, is selected when you reschedule an order (applicable if the checkbox Resource consumption in BOM lines is selected).  Schedule references – Includes scheduling of sub-production orders.  Primary resource selection (for job scheduling) – Specifies whether a capabilitybased resource selection primarily searches the shortest duration (latest start date when scheduling backward) or the highest priority (priority “1” is the highest priority). If required, you can skip particular job types (set the applicable sliders in the field group Cancellation on the tab Parameters per order to “Yes”). With this setting you

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can, for example, skip the setup time if you produce the same product in sequence, or if you want to skip the queue time for a production order of high importance. If you do not execute scheduling in a separate step, it is automatically executed when you update the order to a later status (e.g., if you skip scheduling and immediately release the order). In this case, the Scheduling method on the tab Automatic update of the production control parameters specifies whether Dynamics 365 runs operations scheduling or job scheduling. In order to view the route transactions with the scheduled dates, click the button PRODUCTION ORDER/Production details/Route in the production order. Jobs are recorded in a separate table, which you can access with the button PRODUCTION ORDER/Production details/All jobs in the production order. You can view the capacity reservations of resources and resource groups in various inquiries – for example in the capacity load, which you can access with the button RESOURCE/View/Capacity load in the resource form. Capacity reservations for operations scheduling and for job scheduling are shown in separate columns and as a total. On the shop floor, the situation is continuously changing for various reasons – for example, because of delays in the supply of materials. In order to comply with these changes, you can reschedule the orders on a regular basis. For job scheduling, use the periodic activity Production control> Periodic tasks> Scheduling> Job scheduling and enter a filter – for example, on the production order status “Created .. Scheduled” (in the scheduling dialog, click the button Filter in the toolbar of the tab Parameters per order to access the filter). If you reschedule orders with the status “Released” (or a later status) and you have printed the production papers, make sure to replace the papers in the shop floor with papers that show the new dates. When you reschedule production orders, the capacity reservations of the selected orders are deleted and replaced by new reservations. If you want to lock the dates and resource assignments for a particular order, set the slider Locked on the tab Setup in the production order detail form to “Yes” (you can click the button SCHEDULE/ Production order/Locked for rescheduling for this purpose) to prevent rescheduling. If required, you can manually reassign a job to a particular resource. Select the job in the list Jobs to complete in the center pane of the workspace Production floor management for this purpose, click the button Reassign in the toolbar of this list, and select the new resource.

5.4.3.4 Gantt Chart The Gant chart is a graphical representation of the jobs which are generated with job scheduling. It is not only possible to view the current jobs, but you can also use drag and drop features in the Gantt chart to reschedule jobs.

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In order to open the Gantt chart, click the button SCHEDULE/View/Gantt chart in the action pane of the production order. In the Gantt chart, you can select and move jobs as required, and you can use the buttons in the button group ACTIVITY/Maintain to schedule the previous and subsequent jobs automatically. Once you have finished the updates, click the button Save in the Gantt chart to save the updates to the jobs. You can control the layout of the Gantt chart with the buttons in the button group GANTT CHART/Setup.

Figure 5-20:

Updating the Gantt chart for a production order

It is not only possible to access the Gantt chart from the production order, but you can also use the respective button in the resource form, or in the list Jobs to complete in the workspace Production floor management, or in the form Production control> Setup> Resources> Gantt chart (if you want to use this form., first create a setup that specifies the resource groups and resources which you want to view).

5.4.3.5 Releasing In order to transfer the production order to the shop floor, you have to release it. Once released, the production order is shown in the manufacturing execution system (shop floor control module) in Dynamics 365. You can release an order with the button PRODUCTION ORDER/Process/Release directly in the production order. Alternatively, the workspace Production floor management provides a convenient way to release an order: The tile Production orders to release on the left of the workspace opens the Production orders to release form. This form shows all production orders, which have been job scheduled but

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not yet released. Select an order in the upper pane to view the item availability of the related BOM lines in the lower pane (you can click the button Update critical onhand to recalculate the availability). In this way, you can easily check the material availability before you release the order with the button Release in the toolbar of the upper pane. On the tab General of the Release dialog, you can specify whether to print production papers (job or route cards). In addition, the slider References on this tab controls whether referenced sub-production orders are released in parallel. Note: The use of production units in the resource management is a prerequisite to view orders in the Production orders to release form.

5.4.3.6 Starting Starting the production order is a required step before it is possible to post related transactions for materials and resources. In order to start a production order, click the button PRODUCTION ORDER/ Process/Start in the production order form or execute the related periodic activity. If you do not want to start the entire production quantity, you can enter a partial quantity on the tab General of the update dialog for starting. If you enter a From Oper.No. and a To Oper.No., only the selected operations are started. The automatic posting of the resource usage (working time consumption) is controlled by the field group Route card journal on the tab General of the update dialog. The field Route card on this tab specifies the journal name for posting. In the lookup field Automatic route consumption, the following options are available for automatic posting:  Route group dependent – Automatic consumption depending on the route group of the operation (see section 5.3.3).  Always – Automatic consumption of all route operations.  Never – No automatic consumption. The slider Post route card now controls whether the consumption journal is posted immediately. If automatic route consumption is selected and this slider is set to “No”, a route card journal for manual editing is generated (but not posted yet). The automatic consumption of resource capacity is posted in a route card, which is why the route group of operations with automatic consumption should be set up in a way that jobs are not created for these operations. The automatic BOM consumption settings in the field group Picking list journal of the update dialog work similar to the automatic route consumption settings. If you want to post automatic consumption with reference to the settings in the BOM lines, select the option “Flushing principle” (see section 5.2.1) in the lookup field Automatic BOM consumption. This option refers to the corresponding field on the tab Setup of the production BOM line details.

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If you set the slider Print picking list in the update dialog to “Yes”, the picking list is printed in parallel to order starting. If you want to print a complete picking list, set the slider Complete picking list journal to “Yes”. The picking list otherwise only contains items, which are included in the picking list journal that is generated for automatic consumption.

5.4.3.7 New in Dynamics 365 Compared to Dynamics AX 2012, there is the new Gantt chart, the workspace Production floor management, and the release order page with critical inventory.

5.4.4

Case Study Exercises

Exercise 5.8 – Production Order Your company needs five pieces of the finished product of exercise 5.2. Enter a corresponding production order and check the BOM and the route in the order. Exercise 5.9 – Purchase Components In order to process the production order of exercise 5.8, the required components have to be available in inventory. Enter a purchase order with the vendor of exercise 3.2, which includes nine units of the first and five units of the second item of exercise 5.1. Confirm the purchase order and post the product receipt. Exercise 5.10 – Change Status You are asked to process the production order of exercise 5.8. Start with the estimation and check the price calculation afterward. Then execute operations scheduling and job scheduling one after another. Once you have completed scheduling, release the order from the workspace Production floor management. Finally, start the order and print the complete picking list (displayed in a print preview). You do not want to post the picking list. Is it possible to apply these settings as a default for all users?

5.5

Consumption of Material and Resource Capacity

In order to know the quantity in inventory and to analyze production performance, the actual material consumption and the resource usage must be reported. This reporting is always done in production journals, but there are different ways in which you can create and post the journals:  Manually – Enter and post journals in the respective forms (usually done in the office based on manual reports of the shop floor).  Automatically – Create journals automatically (e.g., when starting the order).  With terminals or devices – The manufacturing execution system (shop floor control module) in Dynamics 365 also generates journals when you report consumption on touch-screen terminals or mobile devices in the shop floor.

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In the advanced warehouse management, the consumption of material and the receipt of the manufactured item is registered with mobile device transactions in the warehouse (see section 8.1.3).

5.5.1

Journal Setup and Ledger Integration

There are following types of production journals for posting consumption with reference to a production order:  Picking list – Post item consumption.  Route card – Post the use of resources at the level of operations.  Job card – Post the use of resources at the level of jobs. If item consumption and resource usage are set to be posted automatically (controlled by the Route group and the Flushing principle), Dynamics 365 creates production journals automatically when starting a production order or when reporting as finished. Production journals are also automatically generated when registrations are transferred from the manufacturing execution system (shop floor control module). For BOM lines or route operations which are not posted automatically, you have to create production journals manually and enter the transactions as described below.

5.5.1.1 Journal Setup As a prerequisite for transactions in manufacturing, you have to set up the required journals in the menu item Production control> Setup> Production journal names. Picking lists, route cards, job cards, and report as finished journals refer to different journal names, which you have to set up with the appropriate Journal type. The journal type “Report as finished” does not refer to item consumption, but to the receipt of manufactured items in inventory.

5.5.1.2 Ledger Integration When you post a production journal, the consumption is posted to clearing accounts for WIP (work in progress). The item consumption and the resource usage are posted to the final ledger accounts when you end and cost the production order. As a prerequisite for posting the item consumption to WIP accounts, the slider Post picking list in ledger on the tab General in the production control parameters has to be set to “Yes” (not required for standard cost items). In addition, the checkbox Post physical inventory on the tab Costing method & cost recognition in the item model group of the picked item has to be selected. Like the general ledger transactions with reference to product receipts in purchasing and to packing slips in sales, which are reversed when you post the related invoice, the ledger transactions with reference to picking lists, route card

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journals, and job card journals are reversed when you end and cost the production order.

5.5.2

Picking Lists

Picking list journals are used to register the item consumption related to production orders. In order to access the picking list journals, click the button VIEW/Journals/Picking list in the production order form or open the menu item Production control> Adjustments> Picking list. Like all journals, picking lists are documents which consist of a header and lines. If you access the picking list journals from the menu item, the list page shows all open journals which are not posted yet. If you want to view the posted journals, apply an appropriate filter in the column Posted (use the filter pane, the grid filter, or the advanced filter). If you access the picking list journal directly from the production order form, it shows the posted journals immediately.

5.5.2.1 Entering Picking List Journals If you want to create a new journal, click the button New in the action pane of the list page. Select an appropriate journal name and click the button OK in the Create dialog next. The journal detail form with this journal is then shown in the lines view. In order to facilitate the picking list registration, you can click the button Picking list/ Create lines instead of the button New in the list page or the detail form. In the Create lines dialog, select the production BOM lines which should be used as the default for the proposal. Select the option “Remaining quantity” in the field Proposal if you want to use the open quantity as default for the column Proposal in the picking list lines. If you set the slider Consumption=Proposal to “Yes”, the column Consumption in the journal lines is also initialized with the proposal quantity. In this case, you can immediately post the journal without manual data entry (consuming the estimated quantity).

5.5.2.2 Journal Lines In the journal list page, you can access the detail form with a click on a journal ID shown as a link in the list page. In the journal detail form, click the button Header (below the action pane) if you want to switch to the header view, which shows the complete journal header. When you manually enter a line in the lines view of a picking list journal, select the Lot ID (which links the consumption to a production BOM line) before you enter the Consumption quantity. The checkbox in the column End of the journal line sets the production BOM line to finished and clears the remaining quantity (select the checkbox, if the final consumption is less than the estimated quantity). If you consume an item which is not included in the BOM lines of the production order, insert a picking list line in which you enter the item number (leave the lot ID

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empty). Dynamics 365 in this case automatically creates a corresponding BOM line in the production order and applies the lot ID to the picking list line.

Figure 5-21:

Entering an additional picking list line in a picking list journal

Figure 5-21 shows an example of lines in a picking list journal which are generated by a consumption proposal. The column Consumption in the lines contains a default value for the actual quantity (the slider Consumption=Proposal in the Create lines dialog has been set to “Yes” when creating the proposal). The last line in Figure 5-21 shows a manual entry for an item which is not included in the BOM. The columns Proposal and – only before saving the line – Lot ID in this line are empty. Once you have completed the picking list, you can post the journal with the button Post in the journal list page or detail form. Posting the picking list deducts the quantity from inventory (similar to the packing slip transactions in a sales orders). Inventory valuation applies a preliminary physical value when the picking list journal is posted. The financial valuation is posted later when ending and costing the production order.

5.5.2.3 Inquiries and Reversal If you want to view a posted journal, open the picking list journal form and enter an appropriate filter in the column Posted. The posted journal shows a checkmark in the column Posted and does not allow modifications. Alternatively, you can view the posted transactions in the production posting form. In order to access this form, click the button MANAGE COSTS/Production accounting/ Production posting in the production order form or open the menu item Production control> Inquiries and reports> Production> Production posting. If you want to reverse a posted picking list journal, register and post a picking list journal with negative quantities. You can easily create an appropriate picking list

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proposal with the button Picking list/Create lines in the picking list journal (select the option “Full reversal” in the field Proposal of the Create lines dialog).

5.5.3

Resource Usage

Depending on route group settings and on the way of scheduling the order, you have to use route cards or job cards to record the use of resources (usually measured by the working time).

5.5.3.1 Route Cards and Job Cards Route card journals record the use of resources at the operation level. You should use route cards if you execute only operations scheduling but not job scheduling, or if the setting in the route group (column Job management on the tab Setup) of an operation prevents the use of job cards. Job card journals record the use of resources at the job level. Jobs are created when you execute job scheduling. Depending on the route group setting, you should use job cards instead of route cards when jobs have been created for an operation. The automatic consumption of resource capacity when starting or reporting as finished is posted in route card journals. For registrations that are transferred from the manufacturing execution system, a parameter setting (Production control> Setup> Manufacturing execution> Production order defaults, lookup field Job level on the tab Operations) determines whether job card or route card journals are posted.

5.5.3.2 Journal Registration of Resource Usage In order to access the route card journals, open the menu item Production control> Adjustments> Route card or click the button VIEW/Journals/Route card in the production order form. For job cards, open the menu item Production control> Adjustments> Job card or click the button VIEW/Journals/Job card in the production order. Journal headers and lines in route card and job card journals work similar to picking list journals. But except for the automatic consumption when starting or reporting as finished, there are no consumption proposals in route cards or job cards. When you insert a journal line in a route card or job card journal, select the operation number (or the job identification) first. Then enter the resource, the task type (only in route cards, in job cards it is derived from the job), the number of hours, the produced quantity (Good quantity, only for the task type “Process”), and other data if applicable – for example, the scrap quantity (Error quantity) of the manufactured item. In a job card, you should additionally enter the start time, the end time, and the worker. Once you have completed the journal lines, you can post the journal with the button Post in the journal list page or detail form.

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If you want to view the posted journal afterward, open the route card journal or the job card journal and enter an appropriate filter in the column Posted. In addition, you can view the posted transactions in the route transactions inquiry (button MANAGE COSTS/Cost transactions/Route transactions in the production order) or in the posting inquiry (MANAGE COSTS/Production accounting/Production posting).

5.5.3.3 Reporting as Finished in Route Cards and Job Cards When you register the last operation or job in a journal line, you can select the checkbox in the column Production report as finished to post a report as finished journal for the manufactured item in parallel to the route card or job card. The default for the report as finished setting in journal lines is specified in the production control parameters (tab Journals, slider Automatic report as finished).

5.5.4

Case Study Exercises

Exercise 5.11 – Picking List You can pick the components of the production order of exercise 5.8 now. Enter and post a picking list journal which includes nine units of the first and five units of the second component. You do not expect any additional consumption. Pick from the warehouse in which you have received the items in exercise 5.9. Exercise 5.12 – Job Card Record the actual working time for the operation in the production order of exercise 5.8. For this purpose, enter and post a job card which refers to this production order. Record the production of five units in the time between 8:00 AM and 2:00 PM. You do not want to report the order as finished in parallel.

5.6

Reporting as Finished and Ending Production

In the cycle of production order processing, reporting as finished and ending are the last steps. Reporting as finished posts physical transactions and increases the inventory quantity of the manufactured item. Ending the order then performs costing and posts the financial transactions.

5.6.1

Reporting as Finished

Reporting as finished physically receives the manufactured item in inventory. In Dynamics 365, there are following options to report a production order as finished:  Order status update – Update the status of the production order.  Production journal – Post a report as finished journal.  Last operation – Report as finished in parallel when you post the route card or job card for the last operation.  Advanced warehouse management – Post transactions on the mobile device.

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Optionally, you can use a production input journal (Inventory management> Journal entries> Item arrival> Production input) to post an inventory registration before reporting as finished – similar to the arrival journal in purchasing (see section 3.5.3).

5.6.1.1 Order Status Updates In order to report as finished by updating the order status, click the button PRODUCTION ORDER/Process/Report as finished in the production order form or execute the periodic activity Production control> Periodic tasks> Production order status update> Report as finished. If you only want to report a part of the entire order quantity, edit the Good quantity on the tab Overview (or the tab General) and deselect the checkbox End job in the update dialog before you click the button OK. Select the checkbox End job in the dialog (which clears any remaining open quantity) in case you do not expect any additional report as finished transaction for the order. If you are confident, that the actual consumption of items and resources has been posted completely already, and you do not want to receive messages on open consumption (estimated consumption, which has not been reported or cleared, e.g., with the checkbox End in the picking list line), set the slider Accept error on the tab General to “Yes”.

5.6.1.2 Production Journals Apart from the status update, reporting as finished is also possible by posting a production journal. In order to access this journal, click the button VIEW/Journals/ Reported as finished in the production order form or open the menu item Production control> Adjustments> Report as finished. The way of registering and posting a report as finished journal is similar to the options in a picking list journal (see section 5.5.2), but includes the order status update settings as described above. A report as finished journal is also created and posted if you report as finished with the order status update. Posting a report as finished journal generates transactions which are similar to product receipts in purchase orders: Inventory physically receives the item with a preliminary value and increases the on-hand quantity.

5.6.1.3 Automatic Consumption When reporting as finished, an automatic posting of the item consumption and resource usage is possible the same way as when starting the production order. On the tab General in the Report as finished dialog, the field groups Route card journal and Picking list journal control automatic consumption for this purpose. If you post an automatic consumption when starting and when reporting as finished, select the flushing principle “Start” in the BOM lines that should be consumed when starting the production order, and “Finish” in the BOM lines that

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should be consumed when reporting as finished. With this setting, you can consume some items when starting and other items when finishing a production order. Route operations do not include this option. The automatic posting is executed for all “automatic posting” operations in a production order at the same time – either when starting or when reporting as finished. In order to avoid duplicate posting, select the option “Route group dependent” in the lookup field Automatic route consumption only in the Start dialog or only in the Report as finished dialog – not in both dialogs.

5.6.1.4 Ledger Integration If you want to post to clearing accounts (deducting from WIP) when reporting as finished, ledger integration has to be activated for the report as finished transactions. For this purpose, the slider Post report as finished in ledger on the tab General of the production control parameters has to be set to “Yes” (not required for standard cost items) and the checkbox Post physical inventory on the tab Costing method & cost recognition in the item model group of the manufactured item has to be selected. The ledger transactions with reference to the report as finished transactions are reversed when you end and cost the production order.

5.6.1.5 Reporting Scrap Scrap, which is specified in the BOM or in the route, is planned scrap that is included in the estimated consumption of items and resources. For this reason, the cost analysis does not show this scrap as a deviation between the estimated and the actual consumption. A deviation is only visible if the total actual consumption does not match the estimated consumption. In this context, data in the field group Scrap in the line details of the picking list journal are only used for information purposes and do not generate a separate transaction. Scrapping a manufactured item in the course of production order processing is unplanned scrap. You can report this scrap in the field Error quantity when reporting as finished. The default for the error quantity when reporting as finished is the total of the reported error quantity of all operations (entered in route card or job card journals). If the production control parameter Increase remain qty with err qty is set to “No”, the open quantity of the production order is reduced by the scrap quantity, which means that you accept a lower good quantity. From a financial perspective, you can allocate the costs for scrapping the manufactured item to the good quantity (which means that the good quantity carries all costs of the production order). Alternatively, you can post the costs for scrapping to a separate scrap account (you can specify a default scrap account on the tab Standard update in the production control parameters). If you apply a scrap account, an inventory receipt and an immediate consumption for scrap (crediting

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the scrap account) is posted when ending the order. Only when you use a scrap account, you can scrap an order completely (with no good quantity). The scrap account option is not used for manufactured items with standard costs.

5.6.2

Ending and Costing

Ending a production order is required to post the final costs and to close the order. At the same time, WIP ledger transactions for production journals are reversed. The consumption of materials and resources and the receipt of the manufactured item are posted to the final ledger accounts. You should end a production order in time. Otherwise, the manufactured item is still included in the WIP account balance instead of the stock account balance.

5.6.2.1 Ending Ending a production order closes the order and executes costing in one step. Since it is not possible to post any further transaction for a closed production order, you should not end the order until you are confident that all transactions are posted. In order to end the production order, click the button PRODUCTION ORDER/ Process/End in the production order form. If you want to end multiple orders, execute the corresponding periodic activity in the menu item Production control> Periodic tasks> Production order status update> End. In the inventory transactions, the ending date of the production order is shown in the field Financial date. The receipt status in the transaction of the manufactured item is “Purchased”. For consumed items (BOM lines), the issue status is “Sold”.

5.6.2.2 Costing Costing a production order is the equivalent action to invoicing a purchase order or sales order. When you cost the order (which is done automatically in the course of the ending routine), Dynamics 365 calculates the actual costs of all item consumption and resource usage transactions. Based on these actual costs of the production order, the cost price of the manufactured item is calculated. If the manufactured item applies a standard cost valuation, costing posts the cost price differences to variance accounts. If you want to compare the actual and the estimated consumption, click the button MANAGE COSTS/Calculations/View calculation details in the production order form. The tab Overview costing in the price calculation form shows – at item and operation line level – a comparison of the estimated and the actual quantity consumption, and of the estimated and the actual costs. If you want a summary of the estimation or the actual consumption, switch to the tab Costing sheet.

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Viewing the estimation and the actual consumption in the price calculation

5.6.2.3 Ledger Integration and Inquiries Like invoice posting in a purchasing or sales order, costing a production order generates financial transactions for the items which are consumed or reported as finished. First, costing reverses the WIP ledger transactions that have been posted in picking list journals, route card journals, job card journals, and report as finished journals. In a second step, costing posts the following ledger transactions which close the order financially:    

Consumption of components – To the stock accounts of the BOM line items. Consumption of resource capacity – To the costing accounts of the resources. Receipt of the produced item – To the stock account of the manufactured item. Indirect costs – To the financial accounts specified in the costing sheet.

For the item transactions, applicable main accounts are specified in the posting setup (Cost management> Ledger integration policies setup> Posting). For the resource usage, main accounts can derive from settings in the resource/resource group or in the applicable cost categories. Apart from these settings, production groups are an alternative way to specify applicable main accounts for item and resource transactions. The lookup field Ledger on the tab Setup of the production order detail form (initialized from the production control parameters) determines the setting which is actually used to retrieve the appropriate main accounts (see section 9.4.3). In order to view the transactions that are generated when ending and costing the order, click the button MANAGE COSTS/Production accounting/Production posting in

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the production order form or open the menu item Production control> Inquiries and reports> Production> Production posting. In the production posting inquiry, the ending and costing transactions show the type “Costing”. If you want to view the related ledger transactions, select the respective line and click the button Voucher in the action pane.

5.6.3

Case Study Exercise

Exercise 5.13 – End Production Report the entire quantity of the production order in exercise 5.8 as finished. Then end the production order and check the price calculation inquiry to compare estimation and costing.

5.7

Subcontracting

If it is not possible or advisable to process a particular operation internally (e.g., because of the current capacity utilization or technical reasons), you can subcontract the operation to an external vendor. The BOM and/or route of the manufactured item has to include the subcontracted service in this case. Sometimes, there is the situation that you can execute an operation alternatively internally or externally – for example, small orders internally, and large quantities with a subcontractor. In order to manage these options, you have to set up a route/BOM version for the manufactured item with the internal operation and an alternative route/BOM version with the subcontracted operation. In Dynamics 365, there are two basic options for subcontracting:  External resource – Resource with the type “Vendor” in a route operation.  Purchased service – Service item with the line type “Vendor” in a BOM line. Since a purchase order line needs to contain a physical item or a service item (it is not possible to use procurement categories for this purpose), a purchase order is only created with the second option (“Purchased service”).

5.7.1

External Resources

You can use an external resource in an operation which you do not link to a BOM line with a service item if you do not need to generate a purchase order – for example if there is a contract to use a fixed capacity for a given monthly fee. In this case, create a separate resource group and resource for the subcontractor. The external resource is similar to a regular internal resource (see section 5.3.2), but you should select the Type “Vendor”. In resources with this type, you can select the vendor number in the field Vendor on the tab General of the resource form. In addition, make sure to select appropriate cost categories (depending on the contract, maybe only a Quantity category) and main accounts for subcontracting. Settings for the calendar and for finite capacity depend on the contract.

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In the route operation, select the Route type “Vendor” on the tab General and enter the external resource in the field Costing resource on the tab Setup. On the tab Resource requirements, specify the requirements in a way that the external resource is selected. Processing the operation with the external resource in a production order works similar to processing a regular internal operation.

5.7.2

Purchased Services

If you need a purchase order for the outsourced operation, create a service item and include it in the BOM of the manufactured item. For scheduling purposes, you can link the BOM line with the service item to an external operation.

5.7.2.1 Master Data for Purchased Services The required service item is a product with the Product type “Service”, an Item model group which generates inventory transactions (“Stocked product”), and the Default order type “Purchase order”. In the field Cost group on the tab Manage costs of the released product, you can select a cost group with the type “Direct outsourcing”. The Flushing principle on the tab Engineer should be “Finish”. Other relevant settings in the released product include the item group, the cost price, the dimension groups, the units of measure, the purchase price, the main vendor, and the default order settings.

Figure 5-23:

Settings in a BOM line for a subcontracted service

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In the BOM of the manufactured item, insert a BOM line with the service item and the Line type “Vendor”. Optionally you can enter a Vendor account in the BOM line which overrides the main vendor that is specified in the released product. If you need an outsourced operation for scheduling purposes, you can set it up as described in the previous section. But unlike an outsourced operation which is not linked to a BOM line with a service item, this operation should contain a route group which must specify automatic consumption and – if all subcontracting costs are included in the service item – deactivate cost calculation (sliders in the field group Estimation and costing of the route group set to “No”). In order to assign the BOM line with the service item (for purchasing the subcontracted activity) to the outsourced operation (for scheduling the subcontracted activity), select the appropriate operation number in the field Oper.No. on the tab General of the BOM line and make sure that the slider End is set to “Yes” (you do not consume the service item before the operation is finished). If the material is supplied to the subcontractor, assign the BOM lines of the related components to the outsourced operation in the same way as you link BOM lines to an internal operation.

5.7.2.2 Production Orders with Purchased Services You can manually or automatically create a production order with subcontracted service items in the same way as a regular internal production order. Estimating the production order creates a purchase order for the BOM line with the service item (triggered by the BOM line type “Vendor” and the default order type “Purchase order”). The production BOM, which you can access with the button PRODUCTION ORDER/Production details/BOM in the production order, shows the reference to the purchase order (columns Reference type and Number). Like any other purchase order, the order has to be confirmed before you can receive the service item. Scheduling and releasing a production order with a subcontracted service is not different from the way you process an internal order. But you can start a production order with a subcontracted service in the list page Production control> Subcontracted work, which includes the button Start in the action pane for this purpose. On the tab General in the Start dialog, make sure to apply appropriate settings for automatic consumption (when starting, do not consume the BOM lines which are consumed when you receive the purchase order). In the print options for the picking list, which you can access with the button Print options on the tab General in the Start dialog, you can set the slider Use delivery note layout for the picking list to “Yes” if you supply BOM line items to the subcontractor. When you post the product receipt for the purchase order afterward, settings in the field group Receive purchase order on the tab Automatic update of the production control parameters determine if BOM and route consumption are posted in parallel

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to the product receipt. The settings have to be selected in a way, that consumption is not posted two times – both when starting the production order and when posting the product receipt. Reporting the production order as finished and ending the order works as usual.

5.7.2.3 Item Transfer to Subcontractors If you want to keep control of the materials, which are included in the production BOM and supplied from your warehouse to the subcontractor, you can set up a separate warehouse or location for the subcontractor. When you send an item to the subcontractor, you can register and post a transfer order or transfer journal. The consumption of the BOM lines has to be posted from the subcontractor warehouse or location in this case. For the manufactured item, there is a different situation: If you only enter an additional BOM line (with the service item) and an additional operation (with the vendor resource) in the regular BOM and route as described above, you can assign material to any operation (select the operation number in the BOM line) before or after the external operation (or assign material to the external operation itself, if applicable). Depending on this assignment, the consumption of components is posted before or after the external operation. But there is no inventory transfer of the semi-finished manufactured item to or from the subcontractor. If you transfer a semi-finished product to the subcontractor after some internal operations and you want to keep control of the material flow with the subcontractor, you have to introduce additional BOM levels: Create a semifinished item which contains all items and operations before the external operation, and a second semi-finished item after the external operation. Both items got the default order type “Production”. The BOM of the second semi-finished item contains the first semi-finished item, the subcontracting service item, and – if applicable – additional materials directly supplied to the subcontractor. The BOM of the final manufactured product contains the second semi-finished item and the material required for later operations. With this setup, estimation (or, for planned orders, master planning) generates a production order for the first semi-finished item, which you receive in inventory by reporting as finished. You can use a regular transfer order to transfer the item afterward and consume it in the upper-level production order of the second semifinished item. Processing the production order of the second semi-finished item works as described in the section for production orders with purchased services above. When you receive the second semi-finished item from the subcontractor, report it as finished and consume it in the upper-level production order for the finished product.

5.8 Formulas and Batch Production Orders

5.8

245

Formulas and Batch Production Orders

In discrete manufacturing, a distinct item is produced from multiple components. Process manufacturing, in contrast to discrete manufacturing, is a continuous process which produces a batch-controlled item together with its co-products. Production control in Dynamics 365 supports the requirements of process industries by the use of formulas for material management (instead of the bills of materials in discrete manufacturing). For resource management, process manufacturing and discrete manufacturing share the same functionality. If you work in a discrete manufacturing environment and there are requirements that are covered by process manufacturing features, you can also use formulas. You can, for example, apply a formula with co-products for a cutting operation, even if the items are not batch-controlled. But it is not possible to use formulas in the product configurator.

5.8.1

Formula Management

Formula management is based on bills of materials. Formulas (with formula lines and formula versions) and bills of materials (with BOM lines, and BOM versions) share the same concepts and functionality. But in addition to the functionality in bills of materials, formulas include the following core features:  Co-products and by-products – Produce more than one product in parallel.  Catch weight items (see section 7.2.1) – As finished product or component. In addition, there are features which help to manage the quantity in formula lines (e.g., yield, percent controlled, scalable), and other options which support item substitution (e.g., the plan group).

5.8.1.1 Product Data for Formulas In the released product form, items that are produced with a formula have got similar settings to items that are manufactured with a BOM (including the default order type “Production”). Although there are settings which are more common in process industry than in discrete manufacturing (e.g., weight as inventory unit), the only mandatory difference is the setting in the field Production type on the tab Engineer of the released product. Following options in the Production type refer to formula management:  Formula – For the main item which is produced with a formula.  Co-product – Item produced with a formula in parallel to the main item.  By-product – Like a co-product, but undesirable (causing costs instead of value).  Planning item – Virtual main item, if a formula only produces co-products. Planning items are used if there is no clear physical main item in a formula, but coproducts with similar importance (e.g., gasoline and diesel in a refinery plant).

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You can assign a formula only to an item with the production type “Formula” or “Planning item”. Co-products and by-products are produced in a production order for the related formula or planning item. If a co-product is always produced with the same formula or planning item, enter the respective item number in the field Planning formula of the co-product (on the tab Engineer in the released product).

5.8.1.2 Working with Formulas Formulas and bill of materials are very similar, including the way in which you can access the formula form:  From the released product (Product information management> Products> Released products, button ENGINEER/Formula/Formula versions)  From the menu (Product information management> Bills of materials and formulas> Formulas) Like the assignment of BOMs, the assignment of formulas to manufactured items is called “Version”. The formula version – like the BOM version – can be specified at the level of the site, date (from/to), and quantity. In the released product form, you can only access the formula management for items with the production type “Formula” or “Planning item”. If you access the formula form from the menu, the list page shows all formulas. Click on a formula ID shown as a link in the grid of the list page to open the formula detail form in the lines view, which shows the formula lines. The formula versions (assignment of formula items or planning items to the formula) are shown in the header view, which you can access with the button Header (below the action pane) in the detail form. The field Formula size in the formula version provides the default for the column Per series in the formula lines and is the default quantity for production orders with the particular product. You can optionally record co-products and by-products in the header view of formula detail form – click the button Co-products on the tab Formula versions (or the button FORMULA VERSION/Maintain formula version/Co-products in the action pane of the formula version form accessed from the released product) for this purpose. In the lower pane of the co-product form, you can add co-products and by-products with the respective quantity. For a co-product, you can select the Coproduct cost allocation “Manual” and enter the Cost allocation percent. This percentage determines the inventory value of the co-product – it is the percentage of the total production costs, which you allocate to the co-product. For a by-product, select the appropriate option for additional production costs (e.g., disposal) in the By-product cost allocation. Like bill of materials, formulas and formula versions have to be approved before they are available for production orders. And the active formula version is the default for production orders, the item price calculation, and master planning.

5.8 Formulas and Batch Production Orders

5.8.2

247

Batch Production Orders

Batch orders are production orders for items that are linked to a formula. There is no separate form for batch orders – they use the regular production order form. In the production control parameters, you can select a separate number sequence for batch orders (or use the same number sequence as for regular production orders). The ways for creating a batch order are the same as for creating a regular discrete production order: Apart from manually entering it, you can create it automatically from master planning (including co-product demand in the calculation – select a Planning formula in the planned order if not specified in the released product), from an upper-level production order (line type “Pegged supply”), or from a sales order. If you want to create a batch order manually, click the button Create new/Batch order in the workspace Production floor management or the button New batch order in the production order form. In the Create dialog, select the manufactured item next. It is not possible to select a co-product in the order header – select a related formula item or planning item if you want to produce a co-product. When you create a batch order, Dynamics 365 copies the active/selected formula (and route) of the formula or planning item into the order. In the production order, you can access the formula lines (which show the materials/components) with the button PRODUCTION ORDER/Production details/Formula and the co-/by-products with the button PRODUCTION ORDER/Production details/Co-products. Processing the batch order – from estimation to ending – is not different from a regular production order except when reporting as finished: In addition to the formula item, you can report co-products and by-products as finished. When ending a batch order with co-products or by-products, the production costs are allocated to the co-products according to the settings in the formula, and the additional costs from by-products are posted as a route transaction with a burden cost category (specified in the production control parameters).

6

Operations Planning

The primary responsibility of operations planning is to ensure the required item availability and to accomplish a high economic efficiency. For this reason, operations planning has to deal with the conflicting priorities of high supply readiness and low inventory quantity and value.

6.1

Business Processes in Operations Planning

In Dynamics 365, long-term forecasting and short-term master planning are covered by the operations planning module (“Master planning”).

6.1.1

Basic Approach

The task of forecasting is to identify the item demand on a long-term basis. Master planning calculates the supply and demand on a short-term basis.

Figure 6-1:

Operations planning in Dynamics 365 (forecasting and master planning)

6.1.1.1 Forecasting Forecasting is a long-term prognosis for planning and budgeting purposes. It includes demand forecasts that cover sales and other demand (e.g., manufacturing materials) and supply forecasts that cover purchasing and other supply. Forecast versions enable multiple parallel scenarios.

6.1.1.2 Master Planning Master planning is the short-term planning in the day-to-day business. Based on current orders, on-hand inventory, sales quotations, and forecasts (as specified in the configuration), master planning calculates the item demand and supply. As a result, actual and planned orders for purchasing, transfer, and production are generated. Master planning, like forecasting, provides the option to use multiple scenarios in parallel. A core planning strategy in Dynamics 365 is to maintain a static master plan as a basis for the work in the planning or purchasing department and a dynamic plan for simulation purposes.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_6

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6 Operations Planning

At a Glance: Master Planning

The following example demonstrates the main steps in master planning on the example of the net requirements calculation for a manufactured item. As a basis for the net requirements calculation, enter a sales order with a line with a manufactured item (default order type “Production”) that should be shipped today but is out of stock. In the toolbar of the sales order line, click the button Product and supply/Net requirements to access to the net requirements form with the item availability. In order to update the net requirements with current data, click the button Update/Master planning to execute local master planning.

Figure 6-2:

The net requirements form after executing local master planning

In the described scenario, master planning generates a planned production order for the manufactured item. Since the planned order needs to start in the past in order to meet the delivery date in the sales order, the requirement date in this line is adjusted to the earliest possible date (depending on the related setting for calculated delays in the master plan). The column Delay (days) in the requirement line with the sales order shows the calculated delay. In master planning, you can manage multiple parallel scenarios – for example, a static plan and a dynamic plan. In the net requirements form, the dynamic plan (used for simulation and order promising) is the default for the displayed planned orders. The static plan is used for scheduling and firming orders in the planning or purchasing department. In order to switch between the different plans, select the appropriate option in the lookup field Plan at the top of the net requirements form.

6.2 Forecasting

6.2

251

Forecasting

Forecasting is a long-term prognosis, which you use for estimating and amending future capacities in resource and material management. In addition, you can use forecasting as a basis for budgeting in finance. You can maintain multiple forecasts, which represent alternative scenarios for business development, in parallel. Forecasting in Dynamics 365 does not only include sales forecasts, but you can also include other sources of item demand. In addition, you can manage supply forecasts, for example for long-term vendor contracts.

6.2.1

Basics of Forecasting

Forecast models represent the planning scenarios. When you enter or calculate forecast figures in Dynamics 365, you have to select a forecast model that holds the forecast data. Forecast plans, which are the basis for calculating forecasts in forecast planning, then refer to particular forecast models. You can include a forecast plan in master planning as a source of demand and supply.

Figure 6-3:

Forecasting in Dynamics 365

6.2.1.1 Demand Forecasts Estimated sales figures are the starting point for the forecast of the future demand. Apart from sales demand, the demand forecast may also include other demand – for example, the demand for semi-finished items (instead of finished items) if it is not possible to specify reliable forecasts at the detail level of finished products. Since forecast planning and master planning are based on released products, you have to use item allocation keys if you do not want to enter forecasts at the level of

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individual items. Each item allocation key contains several items and determines the percentage distribution between these items. You can enter forecasts manually (including the option to import forecast data from Excel with the Microsoft Office integration), but it is also possible to generate demand forecasts with Azure Machine Learning features automatically.

6.2.1.2 Supply Forecasts Separately from demand forecasts, you can optionally manage supply forecasts with purchasing transactions and other types of item receipts. The inventory forecast then provides the option to align demand forecasts and supply forecasts.

6.2.1.3 Forecast Planning The aim of forecast planning, which is an optional additional feature, is to calculate the demand for components and materials based on the forecast demand for the finished products (using the active BOM versions). As a result of forecast planning, Dynamics 365 creates planned purchase and production orders in the selected forecast plan. If there is a supply forecast, it determines the minimum quantities for the planned purchase or production orders, no matter if these quantities exceed the direct and indirect demand from the demand forecast. Since forecast planning is used as a long-term prognosis, the calculation does not include current orders and the current inventory.

6.2.1.4 Forecasts in Master Planning You can include forecasts in master planning. For this purpose, settings in the master plans determine if and how to include forecasts. The reduction key in coverage groups and the reduction principle in master plans are options to avoid a duplicate consideration of future demand. Without reduction, a duplicate consideration results from a forecast demand in upcoming periods in which there are actual sales orders already – supposing that these sales orders are part of the forecast quantity and not in addition to the forecast.

6.2.1.5 New in Dynamics 365 Compared to Dynamics AX 2012 R3, Azure Machine Learning-based demand forecasting replaces the SQL Server Analysis Services-based demand forecasting.

6.2.2

Forecast Settings

Before you can start to register forecasts, you have to finish the required setup in Dynamics 365.

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6.2.2.1 Forecast Models Forecast models represent the different scenarios in forecasting. In order to use forecasts, you have to set up at least one forecast model in the menu item Master planning> Setup> Demand forecasting> Forecast models. If you want to structure forecasts (e.g., group forecasts by region), you can configure two-stage forecasting with submodels. Create the submodels like regular forecast models for this purpose first, and subsequently create the main model, to which you assign the submodels (on the tab Submodel of the forecast model form). If you want to protect forecasts against changes, set the slider Stopped in the forecast model to “Yes”. You can use blocking, for example, if you do not want any changes on an annual forecast once it is completed – use a separate forecast model for the next year in this case.

6.2.2.2 Forecast Plans When you enter or update forecasts, you select a forecast model. Forecast plans are used in master planning – they represent a separate forecast scenario. In order to assign a forecast model to a forecast plan, open the menu item Master planning> Setup> Plans> Forecast plans and select the applicable forecast model in the lookup field Forecast model of the respective forecast plan. The forecast plan also contains settings on whether to include supply or demand forecasts. On the tab Time fences in days, enter the periods which should be covered by forecast planning (starting from the day of calculation).

Figure 6-4:

Selecting a forecast model in the forecast plan

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6.2.2.3 Parameters and Item Allocation Keys As a prerequisite for the use of forecasts, the slider Disable all planning processes in the master planning parameters (Master planning> Setup> Master planning parameters) has to be set to “No”. The master planning parameters also contain the field Current forecast plan, which determines the default forecast plan in the inquiries and dialogs for forecast planning. Another important setting for item forecasts is the coverage group, which specifies how to summarize net requirements. The Forecast plan time fence on the tab Other in the coverage groups determines the applicable period for forecast planning. You can find more details on coverage groups in section 6.3.3. If you do not want to enter forecasts at the level of individual items, you can use item allocation keys. With an item allocation key, you can enter a forecast total for a group of items. In order to set up item allocation keys, open the menu item Master planning> Setup> Demand forecasting> Item allocation keys. The tab Item allocation in this form contains the assigned items with their percentage. Demand forecasting parameters (Master planning> Setup> Demand forecasting parameters) are required if you want to Learning-based demand forecasting. As a prerequisite for with Azure Machine Learning features, an Azure Machine required.

Demand forecasting> use Azure Machine generating forecasts Learning account is

6.2.2.4 New in Dynamics 365 Compared to Dynamics AX 7, there is the master planning parameter Disable all planning processes, which deactivates forecasts and master planning.

6.2.3

Forecasts and Forecast Planning

You can insert forecast data manually (including the option to import forecast data from Excel with the Microsoft Office integration) or automatically (with Azure MLbased demand forecasting).

6.2.3.1 Manual Demand Forecasts In order to enter a forecast manually, open the menu item Master planning> Forecasting> Manual forecast entry> Demand forecast lines. Alternatively, you can access the forecasts with the button Demand forecast (or Forecast) in the action pane of the respective master table form – for example, in the released product form (button PLAN/Forecast/Demand forecast) or in the customer form (button CUSTOMER/Forecast/Forecast). When you insert a demand forecast line, select the applicable forecast model in the column Model first. If you want to record different scenarios, select different models in separate lines. In the column Date, enter the start date of the individual forecast period – for example, the first day of a month if you enter a line per month. Then select the Item number or the Item allocation key before you enter the

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Sales quantity and the Amount (or, if it is possible to calculate the amount from the quantity and the price, the Sales quantity and the Sales price). If you want to allocate a forecast line across periods, click the button Allocate forecast in the toolbar of the tab Overview and enter the allocation details in the following dialog.

Figure 6-5:

Allocating a sales forecast line across periods

You can facilitate the manual forecast entry with bulk updates (click the button Bulk update in the toolbar of the tab Overview) or with the Excel integration. In order to use Excel, click the button /Edit demand forecast in Excel in the action pane, change and add lines in Excel as appropriate, and publish the data back to Dynamics 365.

6.2.3.2 Azure Machine Learning-Based Demand Forecasting As an alternative to the manual entry of demand forecast lines, you can create demand forecast lines with Azure Machine Learning (Azure ML). With Azure MLbased demand forecasting, you can calculate forecasts based on historical demand (originating from inventory transactions in Dynamics 365). Once item allocation keys and demand forecasting parameters are set up, you can access the adjusted demand forecast form (Master planning> Forecasting> Demand forecasting> Adjusted demand forecast) and click the button Generate statistical baseline forecast to calculate the forecast using Azure ML. You can edit the forecast data in the adjusted demand forecast as required before you click the button Authorize adjusted demand forecast to create the actual demand forecast lines.

6.2.3.3 Supply Forecasts and Inventory Forecasts If you want to manage a supply forecast separately from the demand forecast, open the menu item Master planning> Forecasting> Supply forecast lines or click the

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button Supply forecast or Forecast in the action pane of the respective master table form (released product, vendor) and enter the supply forecast in a similar way to the demand forecast. Depending on the setup, forecast planning then includes the supply forecast in parallel to the demand forecast. Inventory forecasts show the result of supply and demand forecasts at the level of item numbers and periods. You can access the inventory forecasts with the button Inventory forecast in applicable master table forms.

6.2.3.4 Forecast Planning The results of the forecasts for trade items, manufactured items, and raw materials are a valuable basis for the preparation of future production and purchasing. In order to identify forecast data on multiple BOM levels, you can execute forecast planning (Master planning> Forecasting> Forecast planning). The update dialog for forecast planning includes the lookup field Forecast plan, which determines the forecast plan that is calculated. The results of forecast planning are shown in the gross requirements form, which you can access with the button PLAN/Requirement/Gross requirement in the released product form. By default, this form shows the forecast plan which is selected as the current forecast plan in the master planning parameters. But you can also select a different plan in the lookup field Plan at the top of the gross requirements form. The results of forecast planning are not only shown in the gross requirements form, but in all master planning inquiries (e.g., in the planned order page Master planning> Master planning> Planned orders) if you select a forecast plan instead of a master plan in the lookup field Plan at the top of the respective form.

6.2.3.5 Budget Transfer If you want to use demand or supply forecasts in financial budgets, you can execute the periodic activity Budgeting> Periodic> Generate budget plan from demand forecast (or Generate budget plan from supply forecast) to transfer the forecast figures to budgeting.

6.2.4

Case Study Exercises

Exercise 6.1 – Forecast Settings You are asked to enter a new sales forecast for some items, which you have set up in the previous exercises. This forecast should be included in a scenario which is separate from other forecast scenarios. In order to meet this requirement, create a forecast model F-## (## = your user ID) without submodels and a forecast plan Y-##. Assign the forecast model to the forecast plan and make sure that demand forecasts are included in this plan. In the forecast plan, select a number sequence for Planned orders and for the Session which is similar to the settings in existing forecast plans.

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Exercise 6.2 – Demand Forecast You expect the customer of exercise 4.1 to order 200 units of the merchandise item of exercise 3.5 and 100 units of the finished product of exercise 5.2 on the first day of each of the next three months. Enter this demand in a demand forecast with the forecast model of exercise 6.1. Then execute forecast planning with the forecast plan of exercise 6.1 and check the results.

6.3

Master Planning

Master planning in Dynamics 365 covers the short-term calculation of material and capacity requirements. It is the basis for the day-to-day work in purchasing and production management. The calculation in master planning includes data related to released products and to resources in all areas of Dynamics 365. Depending on the setup, these data include sales orders, purchase orders, production orders, transfer orders, current inventory, forecast plans, and master data (released products, resources). Master planning generates planned orders for purchasing, production (including Kanbans), and inventory transfer. In addition, action messages and notifications on calculated delays support the manual adjustment of current orders.

6.3.1

Basics of Master Planning

Figure 6-6:

Elements of master planning

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Inventory transactions, sales orders, purchase orders, production orders, and the on-hand quantity in inventory are an essential basis for master planning. In addition, master planning can include sales quotations, requests for quotation, approved purchase requisitions, and forecasts. Like in forecasting, you can maintain multiple parallel scenarios in master planning. A scenario is represented by a master plan, which contains the particular settings for the scenario. Relevant settings include the elements that are included in master planning and the calculation principles for planned orders.

6.3.1.1 Master Planning Strategies Master planning is usually executed in a batch job, which calculates the net requirements for all items every night. The result of this calculation is available in a scenario called “static master plan”. The static plan is the master plan which is used for scheduling planned orders in purchasing and production control. It is the default plan which is used when you open a planned order form. Apart from the master plan which is used for purchase and production scheduling, the sales department needs a plan to run simulations that identify possible delivery dates in sales orders and in quotations. This simulation requires master planning only for a particular item. The result of the simulation is available in a scenario called “dynamic master plan”. In order to meet these requirements, there are two different strategies which you can determine in the master planning parameters:  One-plan strategy – One common plan for scheduling and for simulations.  Two-plan strategy – Separate plans for scheduling and for simulations. If the same master plan is selected for the static and for the dynamic master plan in the master planning parameters, you run a one master plan strategy. Planned orders of current simulations in the sales department update the static plan, which is the plan used in purchasing and production control. Depending on the requirements of your enterprise, this strategy may fit your business. If you want to apply a two-plan strategy, select a different master plan for the static and for the dynamic plan. In order to keep the basis for simulations current, you can specify that the result of the static plan, which usually is calculating a schedule for all items every night, is copied into the dynamic plan every time. With this setting, simulation in sales starts with the same data basis as purchasing and production scheduling in the morning. Simulations throughout the day do not modify the planned orders in the static plan, and there are no issues in purchasing and production control that are caused by continuous changes in planned orders.

6.3.1.2 Customer Order Decoupling Point Depending on the structure of the products, there are two key supply policies in production control for fulfilling the customer demand:

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 Make-to-Stock – Produce based on sales forecasts and historical demand.  Make-to-Order – Produce based on confirmed sales orders. In addition, there are hybrid supply strategies that apply a make-to-stock strategy for purchased or semi-finished items with a long lead time and a make-to-order strategy for finished products. If you apply a hybrid strategy, the customer order decoupling point (push/pull point) determines the level in the product structure, to which the items are built to stock. With the use of appropriate coverage groups (see section 6.3.3), you can apply all of these strategies. In case of a hybrid supply strategy, enter forecasts at the semifinished product level (which is the customer order decoupling point for these items). The reduction principle (field Method used to reduce forecast requirements) in the master plan determines the way in which master planning offsets forecasted demand with actual sales orders. Since sales orders do not directly offset forecasts of semi-finished products, you should select to include all inventory transactions – including BOM line demand from production orders – in the coverage groups of applicable semi-finished items in order to comply with this situation. In the coverage group form, the lookup field Reduce forecast by contains the required option for this purpose.

6.3.1.3 Master Planning and Planned Orders Master planning generates planned purchase orders, planned production orders, planned Kanbans, and planned transfer orders based on the item demand and settings for master planning. Depending on the planning method (see section 6.3.4), master planning deletes existing planned orders which are not in the status “Approved”. You can review and edit the planned orders before you transfer them to actual purchase orders, production orders, Kanbans, and transfer orders.

6.3.2

Master Planning Setup

Before you can execute master planning, you have to finish the setup in Dynamics 365.

6.3.2.1 Master Plans A master plan is a scenario, which contains a supply and demand calculation separately from the scenarios in other master plans. Depending on the planning strategy, one or two master plans are used. If you need more simulation scenarios, you can set up additional master plans. You can manage the master plans in the menu item Master planning> Setup> Plans> Master plans. Sliders on the tab General determine for each master plan, which items are included in the calculation:  Include on-hand inventory – Refers to the current inventory.  Include inventory transactions – This is “open orders” (e.g., purchase, sales).

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 Include sales quotations – Optionally restricted by a minimum probability.  Include requests for quotation – Entered in procurement and sourcing.  Include requisitions – Only approved purchase requisitions with the requisition purpose “Replenishment”.  Use shelf life dates – For batch-controlled items.  Include continuity plans – In connection with the retail functionality.  Include supply forecast – For the Forecast model in the master plan. The slider Override on hand, and the related lookup field Consume on-hand inventory, are relevant for sales order lines with the delivery date control “CTP” (see section 4.4.3). In the end this setting controls, whether the item availability for a sales order is verified in the sequence of the order entry or in the sequence of the delivery dates (or, in other words, whether a later order with an earlier date consumes the inventory first). For sales quotations, you can optionally specify a minimum probability percentage. Only quotations with at least this probability are included in master planning. The quotation probability is given by the opportunity that is attached to the quotation.

Figure 6-7:

Editing a master plan in the master plan form

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If you want to include forecasts in master planning, select the appropriate forecast plan in the field Forecast model of the master plan. In order to avoid excessive demand resulting from adding forecasts for a period to actual orders in the same period, you should offset the forecast by the current orders in this case. The required setting for this purpose is the reduction principle in the master plan (lookup field Method used to reduce forecast requirements). If the reduction principle refers to a Reduction key, you have to select a reduction key on the tab Other in the applicable coverage groups. The field Scheduling method in the master plan controls whether to run operations scheduling or job scheduling (see section 5.4.3) for planned production orders. Among other settings for scheduling planned production orders, there is the option to apply finite capacity. The settings on the tab Time fences in days in the master plan form enable to override the time fences which are specified in the coverage groups or in the item coverage. The tab Calculated delays contains settings which specify, whether master planning may set the requirement date in planned orders to a date, which is after the original requirement date (in case it is not possible – based on the applicable lead times – to meet the original requirement date). This setting prevents impossible dates like a delivery date before today.

6.3.2.2 Master Planning Parameters Master planning parameters (Master planning> Setup> Master planning parameters) include general settings for master planning. As a prerequisite for master planning, the slider Disable all planning processes in the parameters has to be set to “No”. Further core parameter settings control the planning strategy: If you want to apply a one-plan strategy, enter the same master plan in the field for the Current static master plan and the Current dynamic master plan. If you want to apply a two-plan strategy, select two different master plans. In a two-plan strategy, you can optionally set the slider Copy the completed and updated static master plan… to “Yes”. In this case, the data in the dynamic plan are updated with the static plan when you execute master planning for the static plan.

6.3.2.3 Warehouse Settings If a particular warehouse (for example, a consignment warehouse that is managed by the customer) should be excluded from master planning, set the slider Manual for the warehouse (Inventory management> Setup> Inventory breakdown> Warehouses, tab Master planning) to “Yes”. The tab Master planning in the warehouse form also contains the slider Refilling and the related field Main warehouse that control, whether the warehouse should be refilled from another warehouse (main warehouse). If selected, master planning

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generates item transfer proposals. As a prerequisite, the item has to contain a storage dimension group in which the checkbox Coverage plan by dimension is selected for the dimension “Warehouse”.

6.3.3

Item Coverage and Item Settings

Coverage groups and settings in the released product control the calculation of the quantity and the delivery date in planned orders.

6.3.3.1 Coverage Principle The coverage principle, which is specified by the Coverage code in the coverage groups, is the primary setting for the item coverage. It controls the way in which requirements are summarized into a planned order.

Figure 6-8:

Coverage principles in Dynamics 365

Dynamics 365 includes four options for the coverage principle (see Figure 6-8):  Period – Summarizes requirements within the coverage period (specified in the coverage group).  Requirement – Creates a planned order per requirement.  Min./Max. – Replenishes to the maximum quantity when inventory drops below the minimum quantity.  Manual – Planned orders are not generated in master planning. Master planning generates a planned order, if the calculated inventory at a date is below the minimum quantity (or below zero, if there is no minimum quantity in the item coverage of the released product).

6.3.3.2 Managing Coverage Groups The coverage group (Master planning> Setup> Coverage> Coverage groups) determines the coverage principle and further settings for the quantity and delivery date calculation. The main setting in a coverage group is the Coverage code, which specifies the coverage principle. For the Coverage code “Period”, the Coverage period below this field determines the number of days for combining demand in one planned order. The field Positive days on the tab General determines the time fence for including the on-hand quantity in the calculation. It should correspond to the lead time or the coverage time fence (depending on the order history).

6.3 Master Planning

Figure 6-9:

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Selecting the coverage code in a coverage group

The Coverage time fence on the tab General and the time fence fields on the tab Other determine the periods which are included in master planning. Depending on the planning strategy and the lead time of the items, the number of days entered in the time fence fields should cover an applicable number of weeks or months. The Automatic firming time fence on the tab Other determines the period, in which master planning does not create a planned order but an actual purchase order or production order. If no main supplier is entered in the released product or specified in an applicable trade agreement for the purchased item, master planning still generates a planned purchase order (in which you can select the vendor). As a prerequisite for the use of vendors from trade agreements in master planning, the slider Find trade agreement in the master planning parameters has to be set to “Yes”.

6.3.3.3 Forecast Plan Calculation and Reduction Keys On the tab Other of the coverage groups, the Forecast plan time fence and forecast reduction settings determine the way in which forecasts are included in master planning. Reduction keys (Master planning> Setup> Coverage> Reduction keys) control the periods and percentages which are used to reduce the forecast figures in the course of time. You can, for example, use a reduction key with a reduction of 75 percent for a period of 7 days, if you usually receive a sales order quantity of 25 percent (in comparison with the forecast) with a delivery date within the next 7 days. As a

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prerequisite for the use of the reduction key in the coverage group, the reduction principle in the master plan has to refer to reduction keys. The reduction principle (field Method used to reduce forecast requirements) in the master plan controls the way in which forecasts are reduced when they are included as demand. If forecasts are entered for semi-finished items (hybrid supply strategy with a customer order decoupling point, see section 6.3.1), the reduction for the semi-finished product should not only include direct sales orders but also demand that is derived from the finished product. Select the option “All transactions” in the lookup field Reduce forecast by of the coverage group to offset forecasts by all issue transactions (including production BOM line demand) in this case.

6.3.3.4 Settings for Calculated Delays and Action Messages Action messages, which are activated on the tab Action in the coverage group form, are messages from master planning which require an adjustment of actual or planned purchase and production orders. The aim of action messages is to support adjustments, which may not be done automatically – for example, postponing a purchase order which is not required at the delivery date of the order. They show optimization proposals for receipt quantities and dates. Item availability is granted, no matter if you disregard action messages. Unlike action messages, calculated delays (activated on the tab Delays in the coverage group form) show actual issues with item availability. A calculated delay is created, if the lead time of the required items at all BOM levels results in a necessary supply before today (which causes a delay in the order fulfillment). If both options, calculated delays and action messages, are activated, you usually select the option “Delayed date” in the lookup field Basis date on the tab Action in the coverage group. With this setting, action messages are based on the earliest possible date and not the original – impossible – requirement date.

6.3.3.5 Assigning Coverage Groups to Items There are three levels for the assignment of a coverage group to an item:  Item coverage – On the tab General in the item coverage (access with the button PLAN/Coverage/Item coverage in the released product).  Released product – On the tab Plan in the released product.  Master planning parameters – General coverage group on the tab General. The coverage group controls the method for the calculation of order quantities. If there is a big difference in the lead time or in the cost price of the items, assign different coverage groups – based on the inventory value and the lead time – to the released products.

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6.3.3.6 Dimension Group Settings Settings in the storage and tracking dimension groups control the inventory dimensions which are kept separately in the coverage calculation. Accordingly, the dimension groups of the item determine the available dimensions in the item coverage form and the dimensions that are calculated separately in master planning (for the supply and demand calculation per, e.g., warehouse). You can manage the dimension groups in the menu folder Product information management> Setup> Dimension and variant groups (see section 7.2.2). Select the checkbox Coverage plan by dimension in the dimension groups for storage and tracking dimensions which should be calculated separately in master planning. Product dimensions (for product masters) and the dimension Site are always calculated separately.

6.3.3.7 Item Coverage Apart from the coverage group and the dimension groups, the item coverage in the released product is another important setting for master planning. You can access the item coverage form with the button PLAN/Coverage/Item coverage in the action pane of the released product. In the item coverage, you can insert records that specify a minimum and – if applicable – a maximum quantity for the item. Depending on the dimension groups of the item and the coverage settings in these dimension groups, you have to enter the item coverage per site, warehouse, or other dimensions like color or configuration. The item coverage form contains settings for the item at dimension level. These settings may override settings from the item or the coverage group. You can, for example, select a coverage group for a particular warehouse which is different from the coverage group in the released product (for this purpose, select the checkbox Use specific settings above the field Coverage group on the tab General in the item coverage). You can also select a particular main vendor and planned order type – for example if you purchase an item from an external vendor for one warehouse, but produce it internally for the other warehouses. If you enter a minimum quantity, you can specify a seasonal distribution with the lookup field Minimum key on the tab General. The results of the minimum key are shown on the tab Min./Max. in the item coverage form. In the minimum keys (Master planning> Setup> Coverage> Minimum/Maximum keys), you can specify a percentage per period on the tab Periods.

6.3.4

Master Planning and Planned Orders

Based on item requirements and coverage settings, master planning generates planned orders for purchasing, production and inventory transfer. There are two different types of master planning:

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 Local master planning – Availability check (e.g., in a sales order line).  Global master planning – Regular master planning for all items.

6.3.4.1 Global Master Planning Global master planning generates proposals for orders for purchasing and production in the day-to-day business of the planning department. Depending on the company size and the item structure, master planning involves extensive calculations. For this reason, it is usually executed as a batch job in the nighttime. In order to start global master planning, open the menu item Master planning> Master planning> Run> Master planning or click the corresponding tile in the workspace Master planning. In the Master planning dialog, select the applicable Master plan (for global master planning usually the current static master plan). The lookup field Planning method in the Master planning dialog determines the calculation principle. You can choose between the following options:  Regeneration – Complete calculation, deleting all planned orders (except approved planned orders).  Net change – Generates action messages and calculated delays for all requirements, but planned orders only for new requirements.  Net change minimized – Like net change, limiting new messages to new requirements. If the current static plan is selected, “Regeneration” is the only available planning method. For dynamic plans, also select the option “Regeneration” if there are changes in the coverage settings (e.g., a new minimum quantity for an item).

6.3.4.2 Local Master Planning Unlike global master planning, local master planning is used to check the item availability and the possible delivery dates for a particular item. You can execute local master planning in the net requirements form, which you can access with the button PLAN/Requirement/Net requirements in the action pane of the released product or with the button Product and supply/Net requirements in the toolbar of order lines. The net requirements form shows the result of the last master planning cycle for the dynamic master plan. If a one master plan strategy is in place, the lines in the net requirements are identical to those used in purchasing and production control. The button Update/Master planning in the action pane of the net requirements form starts local master planning. By default, local master planning for the selected item and its components updates the current dynamic master plan. When you review the results, take into account that not all dependencies with other items are covered by the calculation, particularly with regard to the resource capacities.

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6.3.4.3 Action Messages and Calculated Delays If calculated delays (which show availability issues) and action messages (which show optimization proposals that require manual decisions) are activated in the applicable coverage groups, master planning generates corresponding messages. These messages are shown in the columns of the net requirements form. The list page Master planning> Master planning> Calculated delays (also included as a tile in the workspace Master planning) gives an overview of all calculated delays. When you open this form, select the appropriate (static or dynamic) plan in the lookup field Plan at the top first. If you want to access a particular order, click on the order number shown as a link in the column Number of the list page or click the button CALCULATED DELAYS/Open/Reference. The list page Master planning> Master planning> Actions> Actions (also included as a tile in the workspace Master planning) gives an overview of all messages. Like in the calculated delays, you should select a plan in the lookup field Plan first. With a click on the order number shown as a link in the column Number, you can access the details of an order. You can immediately execute the action message of a particular line (e.g., the action of deleting a purchase order) with the button Apply action in the action pane of the action form. The button Action graph in the action form provides access to a chart which shows the dependencies between related action messages.

6.3.4.4 Working with Planned Orders Master planning generates planned orders, which you can view in the list page Master planning> Master planning> Planned orders and in the tabbed list pane of the workspace Master planning (e.g., in the list Urgent). In order to restrict the displayed planned orders to a particular master plan, select the respective master plan (e.g., the static plan) in the lookup field Plan at the top of the list page or the workspace.

Figure 6-10:

Working with planned orders

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The planned order list page in the master planning menu – and the workspace Master planning – show planned orders for purchasing, for production, and for inventory transfers (indicated by the column Reference). A filtered view of planned orders is available in all relevant modules – for example, the menu item Procurement and sourcing> Purchase orders> Planned purchase orders> Planned purchase orders in purchasing. If the master planning calculation shows that it is not possible to meet a required date and the slider Add the calculated delay to the requirement date on the tab Calculated delays in the selected master plan is set to “Yes” for the relevant order type, the Delivery date in the planned order is adjusted to the earliest possible date. The original – impossible – requirement date is shown in the column Requested date then. Apart from the delivery date and the requirement quantity, the planned order page displays action messages and calculated delays in separate columns. The planned order detail form, which you can open with a click on the order number shown as a link in the column Number, shows the details on the action message and calculated delays on the tabs Action and Delays. The tab Pegging in the detail form shows the requirements (including sales orders, BOM lines of production orders, demand forecasts, or safety stock) that are covered by the selected planned order.

6.3.4.5 Firming Planned Orders On the tab Planned supply of the planned order detail form, you can edit the delivery date and the quantity. For planned purchase orders, make sure that a vendor number is entered in the lookup field Vendor. If you want to add a planned order as an additional line in an existing purchase order (instead of creating an additional purchase order), select this order in the field Purchase order number. In case your enterprise wants to use the status management for planned orders, click the button Approve or PLANNED ORDER/Process/Change status in the action pane to change the planned order status to “Approved”. Subsequent master planning does not update or delete approved planned orders. In the next step, select one or more planned orders in the planned order list page and click the button Firm in the action pane to generate corresponding purchase orders, production orders, or transfer orders. If you want to create a request for quotation (see section 3.8.3) instead of a purchase order, click the button PLANNED ORDER/Maintain/Change to/Request for quotation. When you firm a planned production order, the Requested production status on the tab Other of the applicable coverage group determines the initial status of the production order. When you firm a planned purchase order, the purchase order always has the approval status “Approved” (irrespective of change management settings).

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The firming history (Master planning> Inquiries and reports> Master planning> Firming history) displays a log of firming activities. Apart from the planned order list page, the workspace Master planning also includes lists with toolbars (e.g., the list Urgent) which you can use to edit and to firm planned orders.

6.3.4.6 Net Requirements and Explosion In order to get an overview of the net requirements related to a planned order, click the button VIEW/Requirements/Requirement profile in the action pane of the planned order form. The requirement profile shows the net requirements form, which you can also access from the released product form or from the order lines.

Figure 6-11:

Analyzing the availability within the BOM structure in the explosion form

The button VIEW/Requirements/Explosion in the action pane of the planned order form provides access to another inquiry, the explosion form. This form, which you can also access with the button Product and supply/Explosion in the toolbar of sales order lines, shows the item availability, including components at all BOM levels. With the button Setup in the action pane of the explosion form, you can change the display settings. The button Explosion view in the action pane determines the direction of the explosion: If you select “Down”, the form shows the semi-finished items and components of the selected item. If you select “Up”, the form shows a where-used analysis.

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When you update the calculation with the button Update in the explosion form, a dialog is displayed in which you can set the slider Enable trace to “Yes”. This setting creates a log of the impacts and the results of master planning, which you can view on the tab Explanation in the explosion form afterward.

6.3.4.7 Supply schedule The supply schedule form contains a comprehensive view of the future supply and demand – similar to the net requirements but summarized per period and transaction type. As a prerequisite for the use of the supply schedule, you have to set up period templates (Organization administration> Setup> Calendars> Period templates) with a period configuration, which determines the columns in the supply schedule, on the tab Periods. If you access the supply schedule from the master planning menu (Master planning> Master planning> Supply schedule), a filter dialog is shown. In this dialog, enter a filter on the Plan (relevant for the display of planned orders), Period template, Item or Item allocation key, and – optionally – inventory dimensions.

Figure 6-12:

Viewing supply details in the supply schedule

Apart from the menu item, the supply schedule is also available in many other forms. These forms show a respective button in the action pane or toolbar – for

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example, the button PLAN/View/Supply schedule in the released product or the button Inquiries/Supply schedule in the net requirements. In the supply schedule form, you can view supply and demand details on a tab at the bottom – select a cell in a period column and click the button Expand/Collapse in the toolbar for this purpose. With the button New, you can manually create planned or actual orders directly in the supply schedule form. Alternatively, you can start local master planning with the button Master planning.

6.3.4.8 New in Dynamics 365 Compared to Dynamics AX 2012, changes include the terminology (“calculated delays” replace “futures”), the workspace Master planning, and the firming history.

6.3.5

Case Study Exercises

Exercise 6.3 – Min./Max. Principle A Min./Max. coverage principle should be used for the finished product I-##-F of exercise 5.2. Select an appropriate coverage group in the released product form, and enter a minimum quantity (500 units) and a maximum quantity (1000 units) in the item coverage of the item. Then run master planning in the net requirements form and review the result. In a second step, change the minimum quantity to one unit and execute master planning a second time. Can you explain the new result? Exercise 6.4 – Period Principle A coverage principle which summarizes the requirements per period should be used for the item I-##-F of exercise 5.2 now. Select an appropriate coverage group in the released product and delete the Min./Max. record in the item coverage. The customer of exercise 4.1 orders 100 units of the finished product I-##-F of exercise 5.2. Enter a corresponding sales order, but do not post the packing slip or invoice. Execute master planning in the net requirements form and review the result. Then enter another order of that customer with 150 units of the finished product and the same delivery date as the first order. Execute master planning a second time and check the result again. Exercise 6.5 – Planned Purchase Order A minimum inventory quantity of 100 units (more than the available quantity) is required in the main warehouse for the item I-##-C1 of exercise 5.1. Enter this minimum quantity in the item coverage. Then open the net requirements form for the item and execute master planning. What is the result? Open the planned purchase order form in the procurement and sourcing menu. If required, switch to the dynamic plan that you have used for master planning in the

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net requirements. Select the planned order which refers to the item I-##-C1 and transfer it to a purchase order.

7

Inventory and Product Management

The primary responsibility of inventory management is to run the warehouse in terms of quantity and value. In order to meet this task, any update of the inventory quantity has to be registered and posted in a transaction. Most of the transactions are not a result of business processes within inventory but derive from other areas. For example, posting a product receipt in purchasing generates an inventory transaction for the receipt.

7.1

Principles of Inventory Transactions

Before we start to go into details, the lines below show the principles of transactions in inventory management.

7.1.1

Basic Approach

Inventory management controls the inventory per product (item number). The most important master data in inventory management are the product records of inventoried items accordingly. Depending on the dimension groups that are assigned to the particular product, the quantity and value of the item are controlled at the more detailed level of inventory dimensions. Inventory dimensions include storage dimensions (e.g., warehouse or location), tracking dimensions (e.g., serial numbers), and product dimensions (e.g., configurations). Settings in the storage dimension group and in the warehouse control, if the basic approach for warehouse management or the advanced warehouse management (with license plates/pallets and mobile devices) is in place. This chapter explains the basic approach for warehouse management, detail on the advanced warehouse management are given in section 8.1. But except for quarantine management, the features of the basic approach are also available in the advanced warehouse management.

7.1.1.1 Types of Transactions In order to update the on-hand quantity, you need to post an item transaction. Depending on the direction, the transaction belongs to one of the following types:  Item receipt – Inbound transaction.  Item issue – Outbound transaction. Item receipts increase the on-hand quantity. They include product receipts in purchasing, customer returns in sales, product receipts in production (reported as finished), positive adjustments in counting, and manual journals in inventory.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_7

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Item issues, which reduce the on-hand quantity, include vendor returns in purchasing, packing slips in sales, picking lists in production, negative adjustments in counting, and manual journals in inventory. Inventory transfers, which are an issue from one warehouse (or another inventory dimension) and a receipt on another, include transfer orders and transfer journals. You use transfer orders to move items from one warehouse to another, particularly if you need a picking list. Unlike transfer orders, transfer journals are not only available for transfers from one warehouse to another, but you can also change other dimension values (e.g., for the adjustment a serial number).

7.1.1.2 Transactions from Other Areas Most of the inventory transactions are not originally entered in inventory but derive from other areas in Dynamics 365. The transaction origin in the other module (e.g., a purchase order/product receipt) has to contain all data which are required to post the inventory transaction (e.g., warehouse, quantity, and cost price). In a posted inventory transaction, you can view the reference to the transaction origin, including voucher number and date.

7.1.1.3 Inventory Quantity and Value In order to grant an accurate inventory valuation, Dynamics 365 differentiates the physical transaction (which determines the on-hand quantity) and the financial transaction (which determines the financial value). For illustration purposes, Figure 7-1 shows the physical and the financial part of an inventory transaction related to a purchase order line.

Figure 7-1:

Physical and financial transaction in inventory for a purchase order line

The physical transaction in Dynamics 365 causes a change of the on-hand quantity. An example of a physical transaction is the product receipt in purchasing. In terms of inventory quantity, the transaction is already completed when you post the product receipt. But inventory valuation only receives a preliminary cost price. For this reason, the value of the product receipt is shown in the field Physical cost amount of the inventory transaction details, separate from the field Cost amount that contains the financial inventory value. The second step in processing an inventory transaction is the financial transaction, which contains the cost amount for the invoiced quantity. An example of a

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financial transaction is the purchase order invoice. Posting the vendor invoice reverses the related preliminary posting of the product receipt (physical amount) and posts the final cost amount of the invoice. The invoice quantity and amount are subsequently included in the financial inventory value.

7.1.1.4 Posting Inventory Transactions The differentiation between the physical and the financial transaction applies to every inventory transaction, no matter in which module it is generated. But the way of posting a transaction depends on the origin. For receipt transactions in purchase orders, posting the product receipt generates the physical transaction, and posting the vendor invoice the financial transaction. In production, reporting the manufactured item as finished generates the physical transaction. The financial transaction is posted by ending the production order. For issue transactions in sales orders, posting the packing slip generates the physical and posting the invoice the financial transaction (similar to purchasing). In production, posting a picking list generates the physical transaction for BOM lines (materials). The financial transaction for BOM lines is posted in parallel to the financial transaction for the manufactured item when ending the production order. Unlike the other transactions, journals in inventory management do not generate the physical and the financial transaction in two separate steps, but in parallel.

7.1.1.5 Inventory Closing For receipt transactions, the financial value is posted finally – apart from later manual adjustments – with the invoice or with production order ending. But for issue transactions, the financial inventory value sometimes is not known – and therefore not final – when posting the invoice. You can, for example, receive the purchase invoice with the final cost price of an item after you have posted a sales invoice with the item. If there is a price on the purchase invoice which is different from the preliminary price in the product receipt, the final costs of the sold item, and therefore the profitability of the sales transaction, are modified. Depending on the date of the purchase invoice receipt, it is even possible that this change is not posted in the same period as the original sales invoice. Except for items with a standard cost price or a moving average valuation, you need to execute inventory closing to re-evaluate issue transactions. The main purpose of inventory closing, usually a month-end procedure, is to recalculate the financial value of issue transactions based on the final value of receipt transactions.

7.1.1.6 Ledger Integration Based on the deep integration of finance with the business processes in all areas of Dynamics 365, the inventory journal transactions are posted to ledger accounts in the same way as inventory transactions in other modules (see section 9.4).

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At a Glance: Inventory Journal Transactions

Inventory journals are a way to update the on-hand quantity of items manually, separately from orders in purchasing, sales, or production. The example below shows a manual item receipt in an inventory adjustment journal. In regular business, such transactions are an exception, since problems (or missing end-toend business processes) in most cases are the reason for receiving an item which not related to a purchase order, production order, or customer return. When you open the inventory adjustment list page (Inventory management> Journal entries> Items> Inventory adjustment), it shows all open adjustment journals which are not posted yet. If you want to view posted journals, enter an appropriate filter on the column Posted (you can use the filter pane, the grid filter, or the advanced filter). A corresponding icon in the column In use indicates if somebody is currently working in a particular journal. If you want to access the details of a journal, click on the journal ID shown as a link in the grid. In order to register a new transaction, click the button New in the action pane of the list page. In the Create inventory journal dialog that is shown next, select a journal name in the field Name and optionally enter a Site and Warehouse (used as the default for the lines). If you want to support later analysis, enter a short text that explains the use of the journal in the field Description. The journal number in the field Journal derives from the applicable number sequence.

Figure 7-2:

Creating a new journal in the inventory adjustment journal form

Once you click the button OK in the dialog, Dynamics 365 creates the journal header and switches to the journal detail form. If you want to view the complete journal header, switch to the header view (click on the button Header below the action pane in the detail form). In the lines view, click the button New in the toolbar of the tab Journal lines to insert a line. Select the item number in the new line before you enter the site, warehouse, and other inventory dimensions as specified in the applicable dimension groups. In order to control the dimension columns that are displayed in the lines, click the

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button Display dimensions in the toolbar of the journal lines. You can enter further details on the sub-tabs of the tab Line details. If you enter a positive quantity, the transaction is a receipt. A negative quantity creates an issue. Default values for the warehouse, quantity, and cost price derive from the released product. The default for the quantity is 1.00 if the default order settings of the item do not specify a default inventory quantity.

Figure 7-3:

Registering a journal line

Unlike a receipt transaction in purchasing, the inventory journal transaction is not split into a physical transaction (product receipt) and a corresponding financial transaction (invoice). Inventory journals generate the physical and the financial transaction in one step. For this reason, make sure that journal lines with a positive quantity (item receipts) contain a correct cost price when you post the journal. Once you have entered the last journal line, post the journal with the button Post in the action pane of the journal list page or detail form. Before posting, you can optionally click the button Validate to check potential issues.

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Product Information Management

Since all business processes which refer to inventory require inventoried products, product data are the core master data in supply chain management. The data structure of products in Dynamics 365 includes two levels – the shared products with common basic item data in all companies, and the released products with company-specific item data. The product table contains all physical items – raw materials, components, semifinished products, and finished products. In addition, product records also include non-inventoried items like service or phantom items. These items do not exist physically, but you can use them in order management or in bills of materials. In various areas of Dynamics 365, for example in the order lines in purchasing and sales, the label “Item” is used for released products.

7.2.1

General Product Data

Details on product data with regard to purchasing, sales, production, and master planning are included in section 3.3, 4.3, 5.2.1 and 6.3.3. The current section does not include the topics which are covered in these sections. Apart from general features in the product and released product form, the focus in this section is on item data in inventory, and on inventory valuation.

7.2.1.1 Structure of Product Data In Dynamics 365, all products in the companies of a common enterprise are included in the shared product table. In order to be available in a company, the shared product has to be released to the particular company. It is not necessary to release a product to all companies at the same time – you can also release a product to some companies earlier and to other companies later.

Figure 7-4:

Main control groups of a product

The shared product table contains the common product data in all companies. These data include the product number, the product type (“Item” or “Service”), the product subtype (“Product” or “Product master”), and the dimension groups. The

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dimension groups are not mandatory in the shared product – you can leave the dimension groups empty and enter them at the company level in the released products. Most product details are specified at the company level in the released product form. Required fields in the released product include the dimension groups (if not specified in the shared product), the item group, the item model group, and the units of measure.

7.2.1.2 Entering Shared Products Depending on the requirements, there are two ways of creating a new product (compare section 3.3.2):  Start with the shared product – Create a shared product and release it.  Start with the released product – Create a product in the released product form (automatically generating a shared product in the background). In order to view the list of all shared products, open the menu item Product information management> Products> All products and product masters. The list pages Products (for items without configurations or variants) and Product masters (for configurable items) show a filtered view of all shared products. If you want to create an item in the shared product form, click the button New in the action pane. You can subsequently release the product to one or more companies – click the button Release products in the action pane and select applicable companies in the Release products wizard for this purpose. In order to access the released products, open the menu item Product information management> Products> Released products. Alternatively, you can access a released product directly from the shared product. For this purpose, click on the link in the field Item number on the right of the FactBox Released to companies and – in the Product information dialog, which is shown next – click on the link in the field Item number there. The workspace Released product maintenance is another place, from which you can access the released products. In the center pane of this workspace, the list Recently released shows the items which have been released in the past days (specify the date range with the button Configure my workspace) and the related validation result (missing field values). There are two ways to create a released product: Apart from creating and releasing a product in the shared product form, you can create the released product with the button New directly in the released product form. The New released product dialog, which includes data for the shared and for the corresponding released product (with all mandatory fields of the released product), then creates the shared product and the released product in parallel. If there are templates for released products, the additional field Apply template, in which you can select an appropriate template, is shown in the dialog.

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You can also apply templates for released products at a later stage – click the button PRODUCT/Maintain/Apply template in the released product for this purpose. The template then overrides the data in the released product with data from the template. If you want to create a template in the released product form, click the button PRODUCT/New/Template.

7.2.1.3 Product Numbers and Names The Product number, which identifies the shared product, has to be unique across all companies. It is assigned automatically to new products if the number sequence for products numbers (Product information management> Setup> Product information management parameters, tab Number sequences) does not require a manual assignment. The Item number, which identifies the items at the released product level, is identical to the shared product number, if there is no other setting in the number sequence for item numbers (Inventory management> Setup> Inventory and warehouse management parameters, tab Number sequences) of the particular company. When you create a shared product, the default for the Search name derives from the Product name, but you can override it. In addition, you can enter a longer product description in the field Description on the tab General of the shared product detail form. The Product name and Description are both entered in the system language (default language specified in the system parameters, see section 10.3.4). If there are different product names and descriptions in foreign languages, click the button PRODUCT/Languages/Translations in the shared product and enter the appropriate text in other languages. Product name and description are only editable at the shared product level. The Search name in the shared product is a default for the released products, which you can override in the released product form.

7.2.1.4 Product Type and Subtype The Product type controls if a product is an inventoried item. Whereas the product type “Item” characterizes a regular item, the product type “Service” specifies an item without inventory control in any company of the enterprise. The Product subtype controls the options for item configuration. Whereas the product subtype “Product” applies to a regular standard item, the product subtype “Product master” characterizes a base item for assigned product variants.

7.2.1.5 Product Masters For a product with the product subtype “Product master”, the product number alone does not uniquely identify the item in inventory. In transactions with this item, you have to enter the product variant which distinguishes the different sizes, colors, styles, or configurations of the product.

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When you create a product master (a product with the product subtype “Product master”), the Product dimension group – one of the dimension groups described in section 7.2.2 below – is shown in the Create product dialog. The product dimension group of the shared product determines which of the dimensions Configuration, Size, Color and/or Style are used for the product. The Configuration technology, which is the second mandatory field when creating a product master, determines the way to create product variants. If you select the configuration technology “Predefined variant”, you have to enter the dimension values for the product variants in the product dimension form. Click the button Product dimensions in the action pane of the shared product to access this form, which shows the dimensions of the product (in line with the selected product dimension group) in the left pane. Once you have entered the applicable product dimension values in the product dimension form, specify the valid variants (dimension value combinations) in the product variant form. In order to access this form, click the button Product variants in the shared product. The button Variant suggestions in the product variant form facilitates creating new variants. But if, for example, the product is not available in all colors for each size, you might want to create the variants manually. If a product only includes one active product dimension or if all dimension combinations are valid, set the slider Generate variants automatically in the shared product detail form to “Yes” before you enter product dimension values – with this setting, you don’t have to care about entering the variants (dimension value combinations). Before you can select a product variant in a transaction, you have to release it. Click the button Release products in the action pane of the shared product for this purpose and select the variants, which you want to release, in the Release product wizard. Apart from releasing product variants in parallel to the product master, you can also release variants separately at a later stage. An alternative way for releasing a variant is to create a released product variant (based on the shared product variant) manually in the released product variant form. You can access the released product variant form with the button PRODUCT/Product master/Released product variants in the released product. If applicable, you can specify a default variant for order lines and transactions on the tab Product variants in the released product detail form. If there are common variants for multiple products, you can use variant groups to populate the product dimensions. Create a variant group for sizes (Product information management> Setup> Dimensions and variant groups> Size groups), colors, or styles with the related dimension values for this purpose, and select the size group, color group, or style group in the shared product detail form. The dimension values of the variant group are used as the default value in the product dimensions of the shared product.

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Default order settings for product masters are available at the level of dimension values and variants in the released product. You can, for example, specify a default warehouse for the size “Large” and a different default warehouse for the color “Red”. For an item with the size “Large” and the color “Red”, the priority of settings is given by the field Rank in the default order settings.

7.2.1.6 Core Settings in Released Products Whereas the shared product form only contains a limited number of fields, the released product form includes a wide range of details which characterize the item.

Figure 7-5:

Managing an item in the released product form

Only a few fields in the released product are mandatory, including the unit of measure, the item group, the item model group (see section 7.2.3), and – either at shared product level or at released product level – the dimension groups (see section 7.2.2). You can click the button PRODUCT/Maintain/Validate in the released product to check whether a released product contains all mandatory data. Apart from these fields, further important data in the released product include the item sales tax groups and the cost price (see section 7.3.3).

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7.2.1.7 Units of Measure When you release a product, Dynamics 365 applies the default unit of measure which is specified in the inventory management parameters (field Unit on the tab General of the parameters). As long as no transaction with the item has been registered, it is possible to change the inventory unit of a released product. If an item requires different units of measure in purchasing, sales, and inventory, enter the appropriate units on the tabs Purchase, Sell and Manage inventory of the released product form (e.g., if you manage inventory in pieces, but purchase pallets). The unit in the released product is the default in transactions with the item, for example in a sales order line. In the transaction, you can override the unit. But there needs to be a unit conversion between the inventory unit and the other unit. Units of measure are shared across companies. If you need a new unit of measure, set it up in the menu item Organization administration> Setup> Units> Units before you assign it to a released product. The Unit class (e.g., “Quantity” or “Mass”) categorizes the unit of measure. In one unit per unit class, you can set the slider System unit to “Yes”, which means that this unit is used for quantity fields without a related unit of measure. The field Net weight in the released product form is an example of such a quantity field. Order lines contain fields for both, the quantity and the unit. The button Unit conversions in the Units form provides access to the unit conversions. Conversions on the tab Standard conversion are independent of the product (e.g., the conversion between minutes and hours). On the tab Intra-class conversions, you can enter conversions per item number within a Unit class, and on the tab Inter-class conversions you can enter conversions across unit classes (e.g., between the weight and the quantity). In the shared product and in the released product form, you can access the unit conversions for an item with the button PRODUCT/Set up/Unit conversions.

7.2.1.8 Item Groups The main purpose of item groups (Inventory management> Setup> Inventory> Item groups) is to collect products which post to a common main account in the general ledger. For this reason, you need to set up at least as many item groups as there are different stock and revenue accounts for inventory items. You can find more details on the posting setup in section 9.4.2. When releasing a product, you have to keep in mind that you should not change the item group on the tab Manage costs of the released product once the first transaction is registered. Dynamics 365 displays a warning on possible issues with inventory reconciliation in finance if you do not carefully check the consequences of changing the group. But you can still change the item group, if necessary.

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Item groups are not only used for ledger integration settings in the posting setup, but they also serve as filter and sorting criterion in many reports.

7.2.1.9 Non-Inventoried Items and Services Apart from regular products, which you want to track in inventory, there are items (e.g., services or office supplies) which are not included in inventory. In Dynamics 365, there are two separate ways to specify whether inventory control applies to a product:  Product type – Option “Item” or “Service”.  Item model group – Checkbox Stocked product. Depending on the combination of both settings, inventory control works differently (see Table 7-1). Table 7-1:

Options for the inventory control of products Item

Service

Stocked product

Inventory transactions, inventory quantity

Inventory transactions, no quantity

Non-stocked product

No transactions

No transactions

Product type Item model group

The product type “Service” is used for products, which do not apply inventory control in any company of the enterprise. But if the released product is assigned to an item model group for stocked products, it still generates inventory transactions. This setting is required for intangible items and services which are part of a BOM. If you select an item model group, in which the checkbox Stocked product is cleared, in a released product, there are no inventory transactions for the item. Since the item model group is assigned to the released product, this setting makes it possible to deactivate inventory control for an item at the company level.

7.2.1.10 Product Lifecycle State In the field Product lifecycle state on the tab General in the released product, and in the released product variants, you can assign a lifecycle state to an item or a variant. The setup of the required product lifecycle states (Product information management> Setup> Product lifecycle state) includes the slider Is active for planning, which you set to “No” if items with the respective state should not be included in master planning (which is the appropriate setting for obsolete items). With the periodic activity Product information management> Periodic tasks> Change lifecycle state for obsolete products, you can update the lifecycle state – usually to a state “Obsolete” – of items which have not been created recently and which are not used in a recent transaction.

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7.2.1.11 Catch Weight Products A catch weight product (CW product) is an item with weight as the primary unit of measure, and a secondary unit (catch weight unit) for a countable number (e.g., pieces) in parallel. The weight per unit is variable, and as a result, there is no fixed unit conversion between the weight unit and the catch weight unit. In the order lines of purchase orders, sales orders, or batch production orders, only the catch weight quantity (the countable number) is editable. When you register an inventory transaction, both weight and catch weight quantity have to be entered in parallel. The catch weight functionality originates from process industries. Examples of catch weight products are animals (or parts of animals) in food industry which require to show the counted number and the weight in parallel. Catch weight items usually apply batch numbers or serial numbers.

Figure 7-6:

Entering catch weight settings in the released product

In Dynamics 365, the catch weight functionality is generally available in inventory, in purchasing, and in sales – all applicable forms contain additional fields for the catch weight. The usage in production is limited to batch orders, since only formulas, but not regular bills of materials, can include catch weight items. Because of its complexity, you should only use catch weight if you actually need to track the weight and the catch weight quantity separately.

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In order to set up a catch weight item, set the slider Catch weight (CW product) to “Yes” when creating the shared product. Then click the button PRODUCT/Set up/ Unit conversions in the shared product and enter an Inter-class conversion between the inventory unit (weight) and the catch weight unit (pieces). The catch weight unit has to be a unit without decimals (Decimal precision = “0” in the unit). When you release the product, the inventory unit of the item has to be a weight unit (the default unit in the inventory parameters usually is a weight unit in applicable companies). On the tab Manage inventory in the released product form, select the catch weight unit in the field CW unit and enter the Minimum quantity and the Maximum quantity, which determine the range of allowed conversion (weight per unit). Then enter further data, including the item model group, item group, and dimension groups, in the same way as in any other product. When you register a purchase order line, enter the catch weight quantity (countable number) in the column CW quantity. The column Quantity, which is not editable for a catch weight item, shows the quantity according to the regular unit conversion. When you receive the item in the inventory registration form or in an item arrival journal (see section 3.5.3), you have to enter the CW quantity and the inventory quantity (default from the unit conversion) separately. CW quantity and the quantity in inventory unit have to be entered separately in all inventory transactions, including sales order picking and inventory journals. Inquiries on the current inventory show both, weight and catch weight quantity.

7.2.1.12 New in Dynamics 365 Compared to Dynamics AX 7, the default order settings and site-specific order settings are merged into one common form and available at product variant level, and the new functionality for the product lifecycle state has been added.

7.2.2

Inventory Dimension Groups

Inventory dimensions control the breakdown of the inventory quantity within released products. With dimensions, you can split the inventory quantity and the transactions to a more detailed level than the item number.

7.2.2.1 Available Dimensions The inventory dimensions are divided into the following groups:  Product dimensions – Configuration, size, color, and style subdivide an item based on product characteristics (only available for product masters).  Storage dimensions – Site, warehouse, location, inventory status, and license plate represent inventory structures.  Tracking dimensions – Batch and serial number control tracking options. The dimension “Owner” refers to vendor consignment (see section 7.4.8). The dimension groups of an item determine the inventory dimensions which you have to enter in an inventory transaction. If, for example, the dimension “Batch

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number” is active in the tracking dimension group of an item, you have to enter a batch number when you post a transaction with this item.

7.2.2.2 Dimension Groups and Settings In order to set up a storage dimension group, open the menu item Product information management> Setup> Dimension and variant groups> Storage dimension groups. The menu items for product dimension groups and tracking dimension groups are included in the same menu folder. All dimension group forms look similar, except for the applicable dimensions which are specific to the particular form.

Figure 7-7:

Managing storage dimension groups

The example in Figure 7-7 shows the storage dimension group form with the list of dimension groups in the left pane. In the right pane, you can edit the inventory dimension settings of the dimension group that is selected in the left pane. If you need an additional dimension group, create a new record with the required inventory dimension settings (the checkbox settings are explained in Table 7-2). In storage dimension groups, the dimension Site (see section 10.1.6) is always active, which is why a site has to be entered in every inventory transaction. On the tab Warehouse specific setup, the slider Mandatory controls whether the warehouse has to be entered already when inserting an order line (or other transaction) or if the warehouse may remain empty until posting. The slider Use warehouse management processes, which activates the inventory dimensions Inventory status and License plate, controls whether products with this group use the advanced warehouse management.

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In product dimension groups, only the parameters Active, For purchase prices and For sales prices are available. When you create a product, you have to select dimension groups with dimension settings which are in line with your requirements. You can, for example, only view the on-hand quantity per location, if the dimension Location is active for the respective item. If you need a particular dimension for some, but not for all transactions of an item, a possible way is to use a virtual dimension value for transactions in which the dimension is not suitable. If locations are only used in some warehouses, use virtual locations as default in all warehouses without locations. Table 7-2:

Overview of the settings in the dimensions of a dimension group

Parameter

Explanation

Active

Dimension is used transactions of the item

Active in sales process

In tracking dimension groups, used for simplified serial number control in sales

Primary stocking

Dimension is mandatory in reservations; displayed as default dimension in the on-hand inquiry

Blank receipt allowed

Dimension not required for receipt transactions

Blank issue allowed

Dimension not required for issue transactions

Physical inventory

Item availability per dimension value (depending on the item model group, no negative inventory, e.g., per batch number)

Financial inventory

Inventory value per dimension value (necessary for calculating value and cost price, e.g., per warehouse)

Coverage plan by dimension

Separate item coverage in master planning per dimension value (see section 6.3.3)

For purchase prices

Dimension available for purchase price agreements (see section 3.3.3)

For sales prices

Dimension available for sales price agreements

Transfer

In tracking dimension groups, used for consignment inventory

7.2.2.3 Dimension Groups in the Released Product In order to assign the applicable inventory dimensions to a released product, click the button PRODUCT/Set up/Dimension groups in the released product. A dimension group, which is already entered in the shared product, is not editable in related released products. In order to avoid invalid dimension values in posted transactions, it is not possible to change inventory-related settings in a dimension group (or to select another dimension group in an item) once a transaction refers to the dimension group (or the item).

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If you need to change the dimension settings of an item, post transactions which completely consume the current inventory physically and financially. Before can assign the new group, you still have to execute inventory closing.

7.2.2.4 Number Groups for Tracking Dimensions In the released product form, the Tracking dimension group controls, if batch numbers or serial numbers are used for the item. For batch/serial number controlled items, you need to record the batch/serial number in all transactions. As a prerequisite to enter batch or serial number in a transaction, the batch number table (Inventory management> Inquiries and reports> Tracking dimensions> Batches) or the serial numbers table has to include this number. If your company is in charge of assigning the batch or serial numbers to the physical products (e.g., if you produce them) you can set up tracking number groups (Inventory management> Setup> Dimensions> Tracking number groups) to generate batch or serial numbers automatically. On the tab General in the tracking number group form, you can specify the structure of the batch/serial numbers and select a Number sequence code for the automatic numbers (if you want to use a number sequence, set the slider Number sequence No. to “Yes”). Settings on the tab Activation determine which transactions actually generate numbers. In order to assign a tracking number group for batch or serial numbers to an item, select it in the field Batch number group or Serial number group on the tab Manage inventory of the released product form. If you generate batch or serial numbers, make sure to attach a label with the serial/ batch number to the physical product in order to be able to track the item physically.

7.2.2.5 Simplified Serial Number Control in Sales Processes If you need to track serial numbers along the whole supply chain, the tracking dimension Serial number has to be active. For items that are linked to a tracking dimension group with this setting, inventory transactions are split by serial number (which causes a high number of transactions). If serial number tracking is only required for warranty purposes in sales, there is no need to split inventory transactions by serial number in purchasing and other areas. In this case, you can simplify the inventory processes by tracking serial numbers only in sales. With the sales serial number feature, there is only one inventory transaction record for all serial numbers in a transaction. The serial numbers of the transaction are stored in a separate table, which is linked to the inventory transactions. Sales serial numbers are only available for sales orders and return orders, not for other transactions (e.g., transfer orders). Serial number labels are physically attached to the item in inventory, but not tracked within Dynamics 365 until the order is shipped to or returned from the customer.

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The sales serial number functionality is controlled by the tracking dimension group. If you want to use sales serial numbers, set up a dimension group in which the checkbox Active in sales process is selected for the dimension Serial number. You can register sales serial numbers when you post the picking list registration, the packing slip, the sales invoice, or – in the advanced warehouse management – a sales transaction on the mobile device. If you want to register serial numbers for items with sales serial number control when posting the packing slip, open the Packing slip posting dialog (e.g., with the button PICK AND PACK/Generate/Packing slip in the sales order). On the tab Lines of the posting dialog, click the button Update line/Register serial numbers to access the sales serial number registration form. In the serial number registration form, which supports the use of scanners, enter or scan the serial numbers one by one. If a serial number label on the physical item is missing or not readable, click the button Not readable for the particular item. Once you have registered all serial numbers, close the registration form and post the packing slip. If you do not post a packing slip, but ship the item with the sales invoice, open the serial number registration from the Posting invoice dialog. If you want to know which serial numbers have been shipped, open the serial number inquiry in the related journal. In case of a packing slip, click the button Inquiries/Serial numbers in the toolbar of the tab Lines in the packing slip journal. Tracking of sales serial numbers is also possible in the item tracing form (Inventory management> Inquiries and reports> Tracking dimensions> Item tracing).

7.2.2.6 Dimension Display Settings The primary setting for the display of dimension columns in the grid of forms is specified on the tab Inventory dimensions in the parameters of each relevant module. For example, the inventory dimensions in the sales order lines are controlled in the accounts receivable parameters (Accounts receivable> Setup> Accounts receivable parameters, tab Inventory dimensions). In all forms which contain inventory dimension columns, an appropriate button (e.g., the button Sales order line/Display/Dimensions in the toolbar of the sales order lines, or the button Display dimensions in the toolbar of the inventory journal lines) provides access to a dialog that controls the dimensions that are displayed. If you display an inventory dimension in an inquiry that shows the inventory quantity or value, take into account that the output is only reliable if the selected dimensions comply with the dimension setup. You should, for example, only report the inventory value and the cost price per warehouse, if the checkbox Financial inventory is selected for the dimension Warehouse in the applicable storage dimension group. If there is a different setting, the inventory valuation does not offset the item issue transactions with the receipt transactions at the warehouse level, which is why there is no correct cost price at the warehouse level in this case.

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7.2.2.7 New in Dynamics 365 Compared to Dynamics AX 2012, the module “Warehouse Management II” has been discontinued and related features (e.g., pallets) have been removed. And as a result of the cloud-based architecture, it is not possible to rename product dimensions in the user interface.

7.2.3

Item Model Groups

Item model groups contain settings on the valuation method and on item handling. The number of required item model groups is depending on the requirements for processing items. In a usual Dynamics 365 implementation, there are at least two groups – one for inventoried items and one for service items. In the item model group for service items, the ledger integration should be deactivated. If you change the settings in the Inventory model or Ledger integration of an item model group after posting related item transactions, reconciliation of inventory and finance might become difficult. Before you modify any of these settings, you should carefully consider the consequences.

Figure 7-8:

Settings in the item model group

In the item model group form (Inventory management> Setup> Inventory> Item model groups), the list pane on the left displays the list with the available groups. In the right pane, you can edit the settings of the group that is selected in the left pane.

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7.2.3.1 Settings on Item Handling In item model groups for inventoried items, the checkbox Stocked product needs to be selected. Products that are assigned to a group, in which this checkbox is cleared, do not generate inventory transactions. For non-inventoried products like service items (except subcontracted production services), this is a valid option. The checkbox Quarantine management controls the automatic generation of a quarantine order (see section 7.4.6) when posting an item receipt. The checkbox Registration requirements controls, if you have to post an inventory registration (in the registration form, the item arrival journal, or a mobile device transaction), before you can post the product receipt in purchasing (see section 3.5.3). The checkbox Picking requirements in a similar way controls posting the pick transaction before posting the packing slip in sales. The checkboxes Receiving requirements and Deduction requirements control, if you have to post a product receipt in purchasing or a packing slip in sales before posting the invoice.

7.2.3.2 Negative Inventory In most cases, you do not allow a negative physical inventory for inventoried items, but you do accept a negative financial inventory. A negative financial inventory is a result of posting a sales invoice before posting the purchase invoice. Settings on negative inventory in the item model group depend on the dimension group settings: Dynamics 365 controls negative physical (or financial) inventory only at the level of the inventory dimensions, for which the checkbox Physical inventory (or Financial inventory) is selected.

7.2.3.3 Inventory Model The selected option in the field Inventory model (FIFO, LIFO, weighted average, moving average, or standard cost) determines the inventory valuation method. The valuation method is the way in which issue transactions are assigned to receipt transactions in terms of valuation. You can find more details on inventory valuation methods in section 7.3 of this book, more details on ledger integration in section 9.4.2.

7.2.4

Transactions and Inventory Quantity

Transaction inquiries and inventory quantity inquiries are included in the released product form. But you can also access both inquiries from the order lines or journal lines in a filtered view on the current record (e.g., with the button Inventory/ Transactions or Inventory/On-hand inventory in the toolbar of the sales order lines). The list page Inventory management> Inquiries and reports> On-hand list gives an overview of the on-hand quantity for multiple items (selected in a filter dialog).

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7.2.4.1 Inventory Transactions Inquiry and Cost Entries If you want to access the inventory transactions from the released product form, click the button MANAGE INVENTORY/View/Transactions in the released product. The inventory transaction inquiry then shows all transactions of the selected item. The columns Reference and Number display the original voucher. In order to view the details of a transaction, click the button Transaction details in the action pane. In addition to posted transactions, the transaction form also shows future transactions that are not posted yet. These transactions include quotation and order lines in sales, purchasing, and production, for which no packing slip/product receipt or invoice has been posted. You can recognize such lines by the receipt status “Ordered” or the issue status “On order” (“Reserved physical” in case there is a reservation) and by the empty physical and financial date.

Figure 7-9:

Inventory transaction form with the transactions of an item

The cost entries of an item show a cost-oriented view of inventory transaction data. You can access the cost entries with the button MANAGE COSTS/Cost transactions/ Cost entries in the released product.

7.2.4.2 Physical and Financial Transaction When you post a product receipt in purchasing, a packing slip in sales, a picking list in production, or a report as finished journal, Dynamics 365 populates the Physical date in the inventory transaction with the posting date. In parallel, the status of the transaction changes to “Received” or “Deducted”. In the transaction detail form, the field Physical cost amount on the tab Updates shows the preliminary inventory value of the transaction.

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The Financial date in an inventory transaction is updated when you post the related invoice in purchasing or sales, or when you end the production order. The status of the transaction then changes to “Purchased” or “Sold”, and the inventory value of the transaction is shown in the column Cost amount. Dynamics 365 does not change the posted financial cost amount anymore. If there is a later adjustment of the inventory value, posted with inventory closing or a manual adjustment, the posted difference is shown separately in the field Adjustment on the tab Updates of the transaction detail form.

7.2.4.3 Inventory Picking and Registration Inventory registration in purchasing (see section 3.5.3) and picking in sales (see section 4.5.2) are additional steps when processing an inventory transaction. They update the on-hand quantity of the item and the status of the inventory transaction, but unlike product receipt and packing slip transactions, inventory registration and picking do not generate an unchangeable voucher. Once the packing slip in sales (or the product receipt in purchasing) is posted, the date of the inventory registration (or picking) is shown in the field Inventory date on the tab General in the transaction detail form. If you do not proceed the regular way (post a product receipt after registration, or post a packing slip after picking), but cancel the registration, it is not possible to view the original picking or registration transaction in the inventory transactions anymore.

7.2.4.4 Transaction Details and Ledger Integration Further details on the inventory transaction are shown on the tab Updates of the transaction detail form. The fields on this tab are separated into the field groups Physical, Ledger, Financial, and Settlement. The field group Physical includes the date, number and preliminary value of the product receipt or packing slip. Invoice data are shown in the field group Financial. If the value of a transaction is modified after posting the invoice (as a result of inventory closing, or with a manual adjustment), the value difference is shown in the field Adjustment. The original financial Cost amount does not change anymore, all later adjustments are added in the field Adjustment. The field group Settlement indicates if an inventory transaction is already settled by inventory closing. If the quantity of a transaction is completely settled with offsetting item issues or receipts, inventory closing populates the field Financially closed with the closing date and closes the transaction (the field Value open on the tab General then shows “No”). Registering a manual adjustment of a closed transaction reopens it again. The slider Physically posted on the tab Updates of the transaction details shows if the product receipt or packing slip has been posted to the general ledger. As a

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prerequisite, ledger integration for physical transactions has to be activated in the item model group of the particular item.

Figure 7-10:

Physical and financial data in the inventory transaction details

If ledger integration is activated for financial transactions, the option “Yes” in the slider Financially posted indicates that the invoice related to the inventory transaction has been posted. For purchase invoices, the slider is set to “Yes” after invoice posting even if ledger integration is not active for an item. This has got the reason that a purchase invoice for items always generates a ledger transaction: To a stock account (for the receipt transaction in case ledger integration is active) or to an expense account (for immediate financial consumption otherwise).

7.2.4.5 On-Hand Inventory Inquiry In order to view the current inventory quantity of an item, click the button MANAGE INVENTORY/View/On-hand inventory in the released product form The related list page shows a list with the inventory quantity of the item on the different sites (or other inventory dimensions that are selected as primary dimensions for the item). For a catch-weight item, you can select the option “Catch weight quantities” instead of “Inventory quantities” in the lookup field above the grid if you want to view the quantity in catch weight units.

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On-hand overview with the inventory quantity of an item

If you want to view the quantity at the level of other dimensions, click the button Dimensions in the action pane of the on-hand inquiry to open the Dimension display dialog, in which you can select dimensions which you want to view as columns in the inquiry. If you select, for example, the batch number in this dialog, the on-hand inquiry lines display the quantity per batch number. If you want to view the grand total quantity of the item, clear all checkboxes in the Dimensions display dialog.

7.2.4.6 On-Hand Inventory Details In order to view the details of a line in the on-hand inquiry, open the on-hand detail form with a click on the link in the column Search name of the list page. Apart from the Physical inventory, which is the current quantity in inventory, the detail form shows availability data and the current cost price (average cost price, except for items with a standard cost price or a fixed receipt price). The physical inventory of an item is the total of the transactions with the following status:     

Posted quantity – Invoiced quantity (purchase invoices minus sales invoices). Received – Product receipts in purchasing, added to the posted quantity. Deducted – Packing slips in sales, deducted from the posted quantity. Registered – Registration and item arrival, added to the posted quantity. Picked – Picking in sales, deducted from the posted quantity.

Apart from purchasing and sales transactions, the transactions with the related status in production and all other areas are also included in the calculation. All data that are shown in the on-hand detail form refer to the dimensions of the line in the list page for which you open the detail form. In the example of Figure 7-11, the dimensions in the line of the list page are the site “1” and the warehouse “11”. In line with this selection, Dynamics 365 will apply a filter on this site and warehouse when you access the related on-hand details to view the detailed quantity and cost amount information. When you review the cost price and the cost amount, take into account that data on costs are only reliable for dimensions with separate financial inventory (according to the dimension group settings).

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7.2.4.7 On Hand Inventory in the Past If you want to view the physical inventory on a date in the past, print or view the report Inventory management> Inquiries and reports> Physical inventory reports> Physical inventory by inventory dimension.

7.2.5

Case Study Exercises

Exercise 7.1 – Dimension Groups In order to review the functionality of dimension groups, create a new storage dimension group DS-## and a tracking dimension group DT-## (## = your user ID). Set up the dimension groups in a way that the dimensions Site, Warehouse, and Batch number are required in every transaction. For the warehouse dimension, separate financial inventory valuation should apply. Exercise 7.2 – Item Model Group As a preparation for the next exercise, create a new item model group T-## (## = your user ID) with FIFO valuation (inventory model “FIFO”). The ledger integration for physical and financial inventory should be active. The item model group is used for stocked products, and a negative financial inventory is allowed. All other checkboxes remain cleared, approved vendors are not required. Then set up a second item model group S-## with standard cost valuation, which got the same settings as the first group, except that the inventory model is “Standard cost” and a negative physical inventory is allowed.

7.3

Inventory Valuation and Cost Management

Based on the deep integration of the entire application, Dynamics 365 provides a very accurate calculation of inventory values. In addition to the valuation methods for moving average and standard costs, there is the option to use an end-to-end FIFO or LIFO valuation. Relevant modules in this context are the inventory management module, which contains all data on inventory quantity and value, and the module “Cost management” with forms and features related to inventory costing and valuation.

7.3.1

Valuation and Cost Flow

Inventory transactions update the physical inventory quantity and the financial inventory value In addition to the transaction in the inventory module, which contains the complete physical and financial information, the transaction also generates a cost entry, which only contains the cost-related information. Cost entries are not generated for inventory transfers with no impact on the inventory value.

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7.3.1.1 Basics of Inventory Valuation The basis for inventory valuation is a simple principle:  Receipt costs – The value of receipts is specified in the receipt transaction.  Issue costs – The value of issues is calculated according to the valuation model. The receipt transactions determine the cost price of related consumption (issue transactions). The principle for linking issue and receipt transactions is given by the valuation model (FIFO, LIFO, average cost). It is not possible to enter the cost price or the cost amount in an issue transaction. The standard cost price, which specifies an inventory value that is irrespective of the actual costs, means an exception to this principle. In Dynamics 365, there are two options for standard cost valuation:  Standard cost – Inventory value according to a pre-defined item cost price.  Fixed receipt price – Similar to standard cost, but determining the receipt price. The option “Fixed receipt price” is available in combination with the valuation methods FIFO, LIFO, and average cost. The fixed receipt price locks the cost price for receipts, which means that the cost price does not change with an actual transaction. Unlike the fixed receipt price, the inventory model “Standard cost” provides true standard costs. The standard cost price of an item is immediately used in all issue and receipt transactions. The difference between the methods “Standard cost” and “Fixed receipt price” is obvious when changing the standard cost price of an item. With the standard cost method, an adjustment of the current inventory value is immediately posted. With the fixed receipt price method, there is no adjustment of the current inventory value. The new price is only used for later receipts and the current inventory is issued with the old price until it is completely consumed. The valuation method for an item is given by the field Inventory model in the item model group of the item. In the inventory model, the following options for the valuation method are available:    

FIFO – First in, first out (the value of the first receipt is consumed first). LIFO – Last in, first out (the value of the last receipt is consumed first). LIFO date – LIFO, including only receipts with a posting date before the issue. Weighted average – Average of receipts per period, calculated at the time of inventory closing/recalculation.  Weighted average date – Average price per day.  Standard cost – Pre-defined standard cost price.  Moving average – Keeps the average cost price.

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7.3.1.2 Valuation of Item Receipts The final value of an item receipt is set by the related financial transaction (invoice). Except for items with standard cost or fixed receipt price valuation, which use a pre-defined cost price, the cost price in the receipt transactions is calculated as follows:  Purchase order receipt – Amount of the invoice line including related item charges. If specified in the costing sheet, indirect costs are added.  Production receipt – Cost amount of the production order (total cost of BOM line item consumption and resource utilization, including applicable indirect costs).  Sales return – Original value of the returned item (if assigned to an original sales order), otherwise the return cost price that is entered in the return order.  Other receipt – Cost amount entered in the journal line.

7.3.1.3 Valuation of Item Issues When you post an item issue (e.g., a sales packing slip), the cost price is given by the current average cost price (except for items with a standard cost price or a fixed receipt price). Depending on the setting in the checkbox Include physical value of the respective item model group, this average cost price is only based on financial transactions (invoices) or includes the preliminary value of item receipts that are not invoiced yet. The valuation method is used with inventory closing. Based on the assigned receipts, inventory closing calculates the exact cost price of the issue transactions. For this reason, the issue price and amount are not final until you have posted the financial transaction (invoice) of all assigned receipts and inventory closing has been executed. The assignment of issues to receipts is determined by the inventory model (FIFO, LIFO, or average). In general, the financial date (invoice date) is the basis for the chronological assignment of issue and receipt transactions. The physical date is used for items with the inventory model FIFO or LIFO if the checkbox Include physical value in the respective item model group is selected. In order to determine the correct cost price and inventory value, inventory closing is required for all items – except for items with following valuation methods:  Standard cost price – The standard cost price is immediately used in issue and receipt transactions.  Moving average – Keeps the posted cost price of issue transactions (current average cost price at the time of posting) and does not require inventory closing. These two valuation methods determine the final cost price of consumption already when the consumption is posted.

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7.3.1.4 Standard Cost Price Items with the inventory model “Standard cost” do not require inventory closing because all receipt and issue transactions immediately apply the standard cost price that is specified in the item price form (see section 7.3.3). When you activate a new standard cost price, Dynamics 365 immediately posts an adjustment of the current stock value in inventory and in the general ledger. Therefore, the new standard price is immediately used in issues of the current stock.

7.3.1.5 Fixed Receipt Price The checkbox Fixed receipt price in the item model group is only used in combination with the valuation methods FIFO, LIFO, or average cost. In case of a fixed receipt price, the cost price in the released product form or in the item price form specifies a fixed cost price for receipt transactions. The cost price in issue transactions are calculated in line with the valuation method and – as long as you do not change the item cost price – always comply with the fixed receipt price of the item. When you change the item cost price, issue and receipt transactions apply the new cost price immediately. Since there is no revaluation of inventory when you change a fixed receipt price, the financial value of the current inventory still complies with the old price. As a result, inventory closing is required for the option “Fixed receipt price” in order to adjust the cost amount of issue transactions to the old price according to the valuation method (until the inventory that has been received with the old price has been consumed completely).

7.3.1.6 Moving Average Price For items with the inventory model “Moving average”, receipt transactions are posted with the cost price of the transaction. When you post a vendor invoice, the financial transaction is depending on whether the quantity that is covered by the invoice is still on hand:  Complete quantity still on hand – The total amount in the purchase invoice – including possible differences to the order – is posted as financial cost amount in inventory.  Part of the quantity already consumed – For the quantity that is not in stock, the difference between the physical cost amount and the financial cost amount is posted as an adjustment to a price difference account. When you post an issue transaction (e.g., a sales packing slip), the average cost price at the time of posting is used. This cost price does not change anymore, which is why inventory closing is not required.

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7.3.1.7 Inventory Value Calculation The Table 7-3 below explains the available valuation methods in Dynamics 365. Table 7-3:

Inventory models with the valuation methods in Dynamics 365

Inventory model

Explanation

FIFO (First In First Out)

Item issues are assigned to the oldest item receipt still in stock

LIFO (Last In First Out)

Item issues are assigned to the newest item receipt in stock (including all transactions before the date of inventory closing)

LIFO date

Like LIFO, limiting the assignment of issues to receipts before the particular issue

Weighted average

The cost price of item issues in a period is the average cost price of all receipts (including the beginning balance) in this period, calculated when executing inventory closing

Weighted average date

The cost price of item issues is the average cost price, calculated separately for each day

Standard cost

The cost price of item issues and receipts matches the active standard cost price of the item

Moving average

The cost price of item issues is the average cost price of the inventory quantity at the time of posting the issue

In the following example, you can view the cost price calculation for the valuation methods that are based on the actual costs. Standard cost valuation with a predefined item price (independent of actual receipts) is not included in the example. Table 7-4:

Posted transactions for the comparison of valuation methods

Date

Transaction

Quantity

Cost amount

July 1

Receipt

10

100

July 2

Receipt

10

200

July 3

Issue

10

(to be calculated)

July 4

Receipt

10

300

Table 7-5:

Valuation of the item issue in Table 7-4

Inventory Model

Amount

Explanation

FIFO

100

From the receipt on July 1

LIFO

300

From the receipt on July 4

LIFO date

200

From the receipt on July 2

Weighted average

200

Average of all receipts

Weighted average date

150

From the receipts on July 1 and July 2

Moving average

150

Current average when posting the issue

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The basis of the example are three receipt transactions with different cost prices and an issue transaction in between as shown in Table 7-4. Table 7-5 below shows the cost amount of the issue transaction after inventory closing. This cost amount is depending on the valuation method,

7.3.1.8 Financial Inventory Dimensions and Inventory Marking In addition to the inventory model, the inventory dimension settings have got an impact on the cost amount calculation of item issues. An assignment of an issue to a receipt is not possible across dimensions with a separate financial inventory (according to the dimension group settings). If a separate financial inventory is, for example, activated for the dimension Warehouse, issues of a warehouse “20” are only assigned to receipts in warehouse “20” (including transfers). If a separate financial inventory is not activated for the dimension Warehouse, the assignment only complies with the date sequence – irrespective of the warehouse in the transactions. Marking is another option with an impact on the automatic assignment according to the inventory model. Marking works as a batch for inventory valuation and assigns the cost amount of a particular receipt to a specific issue. You can use it, for example, in vendor returns (see section 3.7.1). If you want to mark a transaction, click the button Inventory/Marking in transactions inquiries, order lines, or journal lines.

7.3.1.9 Inventory Value Report and Cost Explorer The inventory value report is a configurable report with the option to set up multiple report versions. As a prerequisite for this report, you have to set up at least one value report version with the report layout (Cost management> Inventory accounting policies setup> Inventory value reports). The settings in the layout determine which inventory value data are shown in the columns and lines of the report version. When you print the inventory value report (Cost management> Inquiries and reports> Inventory accounting - status reports> Inventory value), select the report layout in the field ID of the print dialog. The cost explorer is an inquiry that shows the assignment and the adjustments (posted with inventory closing) of issues and receipts. In order to open the cost explorer, click the button INVENTORY/Costing/Cost explorer in an inventory transaction that has been financially posted (invoiced). You can access the inventory transactions in various ways, for example with the button MANAGE INVENTORY/ View/Transactions in the released product.

7.3.2

Inventory Closing and Adjustment

At the time when you post an issue transaction, Dynamics 365 always applies the current average cost price (except for items with a standard cost price or a fixed receipt price). In order to calculate the final cost price and inventory value

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according to the valuation method of the item, you have to close inventory. Only items assigned to the inventory model “Standard cost” or “Moving average” are not included in inventory closing.

7.3.2.1 Inventory Closing You need to close inventory periodically – usually in the course of month end closing in finance – in order to show correct item costs in finance and to close the inventory transactions. After inventory closing, it is not possible to post inventory transactions in the closed period. If you have to post a transaction in a closed period, the only option is to cancel inventory closing. In order to close inventory, open the menu item Inventory management> Periodic tasks> Closing and adjustment. The inventory closing form shows the active (i.e., posted) closings. In order to close a period, usually the past month, click the button Close procedure in this form. The first and second option in the close procedure, the check of open quantities and the check of cost prices, generate reports that help to assess inventory transactions. You can run these reports to take corrective actions (e.g., resolve issues with missing or wrong transactions) before you actually close the period. But it is not required to complete these steps. In order to close an inventory period finally, click the button Close procedure/Close inventory in the inventory closing form. Depending on the number of transactions, it might be useful to run closing as a batch job in the nighttime.

Figure 7-12:

Closing a month in the inventory closing form

As a prerequisite for closing a period in inventory, the accounting period in the ledger calendar has to be open. As far as possible, you should post all vendor invoices that refer to item receipts in purchasing, and end all production orders which are reported as finished. The corresponding product receipts in purchasing and production then already include the financial cost amount (instead of the

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physical cost amount which is shown before invoicing), which minimizes the number of open transactions. Once you have finished inventory closing, you can view the posted adjustment transactions with the button Details/Settlements in the inventory closing form. If you have to cancel inventory closing, click the button Cancellation in the closing form. Sometimes, you want to execute the calculation and post adjustment transactions to know the exact inventory value and cost margins according to the inventory model of the items, but without actually closing a period. For this purpose, you can click the button Recalculation in the closing form.

7.3.2.2 Manual Adjustment of Inventory Value If you want to adjust the inventory value of an item manually, use the Adjustment feature. In the inventory closing form, there are the following buttons for the adjustment:  Adjustment/On-hand – Adjusts the cost price and cost amount of the current financial inventory at the level of inventory dimensions (e.g., for a warehouse).  Adjustment/Transactions – Adjusts the cost amount of particular, financially posted, receipt transactions. In the adjustment form that you access with these buttons, click the button Select to open the filter dialog in which you select the respective items or transactions for the adjustment. Then enter a positive or negative adjustment amount in the column Edit now of the adjustment form, or retrieve an adjustment proposal with one of the options in the button Adjustment. Finally, click the button Post in the adjustment form to post the adjustment.

7.3.3

Product Cost Management

The financial value of inventory is a result of the quantity and the cost price of products. In order to support inventory cost management, the cost management module with the workspaces Cost administration and Cost analysis collects relevant information on item costs.

7.3.3.1 Item Base Cost Price The base cost price of an item is specified in the released product form (field Price on the tab Manage costs). This base cost price is used as a default for the cost price of item receipts in inventory journals and counting journals (in case there is no sitespecific cost price in the item price form). In order to avoid transactions without (or with a wrong) cost price, make sure that the base cost price is correct. If the slider Latest cost price on the tab Manage costs of the released product is set to “Yes”, the base cost price in the released product is updated with each financial transaction (e.g., purchase order invoice) of the item. In addition to the cost price in the released product form, the item price form (access with the button MANAGE

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COSTS/Set up/Item price in the released product) also shows this price update. If you want to track the history of price updates in the item price form, activate the price history (inventory parameters, slider Last price history on the tab Inventory accounting). The base cost price is not used for items with the valuation method “Standard cost”. Standard cost price items require an active cost price in the item price form.

7.3.3.2 Costing Versions and Item Price Form You can manage the cost price per site (in parallel to the purchase price and the sales price per site) in the item price form, which you access with the button MANAGE COSTS/Set up/Item price in the released product form. Before you can enter a record in the item price form, an appropriate costing version (Cost management> Inventory accounting> Costing versions) has to be set up. Costing versions contain separate versions of prices and provide the option to set up different calculation principles. Items with standard cost valuation use a costing version with the Costing type “Standard cost”. The costing type “Planned cost” refers to the other valuation methods. You can set up additional costing versions – for example, if you need to calculate prices in a simulation with deviating settings. In order to enter a new cost price in the item price form, switch to the tab Pending prices and click the button New. In the new cost price, select the Price type “Cost” and the applicable costing version in the column Version. You have to select the Site if it is not specified in the costing version. Apart from the Price itself, the item price form contains additional price details like the Price quantity and the Price charges (similar to corresponding settings in the released product form, see section 3.3.3). For manufactured items with a bill of materials, you can click the button Calculate item cost in the item price form to run a cost calculation. Once you have entered or calculated the pending price, click the button Activate pending price(s) to activate it. Only active prices are used as cost price for inventory valuation. They are shown on the tab Active prices of the item price form.

Figure 7-13:

Activating a pending price in the item price form

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For product masters, cost prices are available at the product variant level, if the slider Use cost price by variant on the tab Manage costs in the released product is set to “Yes”.

7.3.3.3 Calculation Groups Calculation groups determine the basis for the calculation of cost prices and sales prices. You can set up calculation groups in the menu item Cost management> Predetermined cost policies setup> Calculation groups. The default calculation group is specified in the inventory accounting policy parameters (Cost management> Inventory and accounting policies setup> Parameters, field group Calculation). At item level, you can select a Calculation group on the tab Engineer in the released product form.

7.3.3.4 Cost Groups Cost groups classify and group the different types of costs in the cost calculation on the one hand, and specify different margins for the sales price calculation on the other hand. You can edit the cost groups in the menu item Cost management> Inventory accounting policies setup> Cost groups. The field Cost group type, which determines the basic costing structure, includes the following options:  Direct materials – For material consumption.  Direct manufacturing – For route operations (consumption of resource capacity).  Direct outsourcing – For purchased subcontracting services.  Indirect – For overhead margins.  Undefined – For unspecific cost classifications. In order to specify a default cost group for a cost group type, set the slider Default in one applicable cost group per Cost group type to “Yes”. Margins for the sales price calculation are specified on the tab Profit in the cost group form – you can enter up to four lines with the Profit-setting (in general, “Standard” is the default as selected the relevant cost management parameters) and the Profit percentage. When you execute a cost calculation or estimate a production order, you can select the Profit-setting in the calculation dialog – for example, if you do not want to use the default because you need to apply a lower margin for competitive reasons. In the released product form, you can select a cost group in the field Cost group on the tab Manage costs. For items that are not assigned to a particular cost group, the default cost group for the cost group type “Direct materials” is used. For route operations (consumption of resource capacity), the applicable cost group is not directly assigned to resources or operations, but via the cost categories (see section 5.3.3).

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7.3.3.5 Costing Sheet The costing sheet (Cost management> Ledger integration policies setup> Costing sheets) is there to establish a clear structure of item costs. It is used for estimation (cost estimation in production orders) and for costing (when ending production orders and in the general item price calculation), and has got two different purposes:  Cost classification – Classification by cost groups.  Overhead costs – Specification of rules for the calculation of overhead costs (used for both, manufactured and purchased items). For classification purposes, the costing sheet constitutes a multi-level structure of the different costs. Apart from the cost groups, which are the bottom level in the structure, the costing sheet can contain nodes for totals at multiple levels. Directly below the node Root, you can set up two primary nodes with the Node type “Price” – one with the Type “Cost of goods manufactured” (for manufactured items) and one with the Type “Costs of purchase” (for purchased items). When you set up the costing sheet, make sure that the cost groups, which are assigned to manufactured items, are below the node with the Type “Cost of goods manufactured”. The node with the Type “Costs of purchase” and the elements below are an optional structure, which you can use to add indirect costs in the costing sheet to the item cost price in purchase orders. If you want to enter a new node in the costing sheet, select the higher-level node and click the button New in the action pane. The lowest level in the costing sheet are the nodes that are assigned to a cost group. When you can create a node for a cost group, select the option “Cost group” in the field Select node type of the Create dialog. Then select the appropriate Cost group on the tab Edit in the new node.

Figure 7-14:

Editing the costing sheet

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If you want to define overhead costs in the costing sheet, select or create a node with a Cost group that refers to the Cost group type “Indirect”. Sub-nodes of such a node determine the calculation rules for overhead costs. When you create a subnode for overhead cost calculation, select the applicable Node type (“Surcharge”, “Rate”, “Output unit based”, or “Input unit based”) in the dialog before you specify the basis for the calculation on the tab Absorption basis in the new sub-node. For a node with the type “Surcharge”, enter the percentage for indirect costs on the tab Surcharge, for the other node types enter an amount for indirect costs on the tab Rate. Then activate the indirect costs with the button Activate in the toolbar of this tab. Main accounts for the general ledger transactions for the indirect costs have to be entered on the tab Ledger postings. Before you close the costing sheet, save the changes with the button Save.

7.3.3.6 Item Price Calculation For manufactured items, you can run a price calculation that is based on the bill of materials and the route. There are two different options to execute this calculation:  Item-specific calculation – Calculate the price of an item in the item price form (e.g., when entering a new item).  Collective calculation – Calculate the price of multiple items in the costing version form (e.g., if you want to calculate all item prices once a year). In order to calculate the price of a particular item, open the item price form with the button MANAGE COSTS/Set up/Item price in the released product, switch to the tab Pending prices and click the button Calculate item cost. For a collective calculation of multiple (or all) items, open the costing version form (Cost management> Inventory accounting> Costing versions), select the appropriate costing version and click the button Calculation. In the calculation dialog that is shown with this button, you can select the Site and the Calculation date (if not specified in the costing version) which determine the applicable active BOM and route of the released products. If you start the calculation in the item price form, you can override the Quantity (the default is specified in the default order settings), or select a particular BOM and Route number in the dialog. If you start the calculation in the costing versions, you can specify an item filter on the tab Records to include of the dialog. On the tab Price recordings in version of the dialog, you can specify whether to calculate the cost price and/or the sales price. Click the button OK in the dialog to start the calculation then. Once the calculation is finished, you can view the result on the tab Pending prices in the item price form (in the costing version form, click the button Price/Item price to access this form). If you want to check the calculation, click the button View calculation details in the item price form to view the price structure. In order to activate a price finally,

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select the respective pending price in the item price form and click the button Activate pending price(s).

7.3.4

Case Study Exercises

Exercise 7.3 – Product Records As a basis to view the impact of settings in the dimension groups and in the item model group, create the following items in the released product form:  Item I-##-S, with standard costs (item model group S-## of exercise 7.2).  Item I-##-T, with FIFO valuation (item model group T-## of exercise 7.2). For both items, select the product subtype “Product” and the storage/tracking dimension group which you have set up in exercise 7.1. Enter an item group for merchandise and select an item sales tax group for purchasing and for sales which refers to the standard tax rate. The unit of measurement is “Pieces”. The base purchase price and the base cost price is USD 50. The base sales price is USD 100. For purchasing, inventory and sales, enter the main site and the main warehouse in the Default order settings. For the item I-##-S, you have to enter and to activate a standard cost price. Specify a standard cost price of USD 50 for the main site in the item price form. Note: If the number sequence for product numbers is set up for automatic numbering, don’t enter a product number. Exercise 7.4 – Inventory Value of Receipt Transactions Enter and confirm a purchase order with the vendor of exercise 3.2. This order includes 100 units of the first item and 100 units of the second item of exercise 7.3, both at a purchase price of USD 60. Check if you can post a product receipt without a batch number. Then open the batch table (use the option View details in the batch number column) and create the batch number B001 for both items. Insert this batch number in both purchase order lines. In the next step, post the product receipt and the invoice receipt for the complete quantity. If you look at the item transactions and the on-hand quantity, can you explain the different cost amount and cost price of the two items? Note: In order to facilitate the tracking of inventory valuation, update the vendor with a sales tax group which does not apply sales tax before you enter the order. Exercise 7.5 – Valuation after a Second Purchase Order You want to receive 100 units of the first and of the second item of exercise 7.3 from the vendor of exercise 3.2 again. Create an appropriate purchase order and enter the batch number B001 and a purchase price of USD 80 in both order lines. Once you have entered the order, confirm it and post the product receipt and the vendor invoice with the entire quantity. In the Product receipt date (on the tab Setup

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of the Posting product receipt dialog), and in the Posting date (in the vendor invoice), enter the day after the posting date of exercise 7.4 (e.g., July 2, if you have posted the transactions in exercise 7.4 with July 1). Once you have posted the invoice, check the inventory transactions, the inventory quantity, and the inventory value (cost amount) of the two items. Exercise 7.6 – Valuation of Sales Orders The customer of exercise 4.1 orders 150 units of the first and 150 units of the second item of exercise 7.3. Enter a corresponding sales order with the batch number B001 in both order lines. Then post the invoice for the entire order. In the Invoice date on the tab Setup of the posting dialog, enter the day after the posting date of exercise 7.5 (e.g., July 3, if you have posted the transactions in exercise 7.5 with July 2). Once you have posted the invoice, check the inventory transactions, the inventory quantity. and the inventory value (cost amount) of the two items again. Exercise 7.7 – Inventory Closing Run a Recalculation in the inventory closing form to calculate the correct inventory value according to the valuation method. In the recalculation form, set the recalculation date to the posting date of exercise 7.6 (e.g., July 3) and enter an appropriate filter which restricts the calculation to the two items of this exercise. For the selected items, check the cost price and the inventory value (cost amount) in the inventory transactions and in the on-hand inventory. Which changes are caused by the recalculation, can you explain the result?

7.4

Business Processes in Inventory

The only way to change the inventory quantity of an item is to post an inventory transaction. Business processes, which change the inventory quantity and do not originate in inventory management, but in other functional areas like purchasing, sales, or production, generate these transactions automatically in the background. Business processes in other areas are shown in the corresponding chapter of this book. The lines below cover the business processes within inventory in the basic approach for warehouse management. But except for the quarantine management, the functionality of the basic approach is also available in the advanced warehouse management (see section 8.1). If you use the advanced warehouse management, inventory transactions are registered on mobile devices in most cases, but you can, if you enter all required inventory dimensions, also post the related transactions with an inventory journal.

7.4.1

Inventory Structures and Parameters

As a prerequisite for inventory transactions, the setup in inventory management and in product management has to be finished.

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7.4.1.1 Warehouse Setup Dynamics 365 includes three storage dimensions which group the inventory according to the physical warehouse structure within the current company: Site, Warehouse, and Location. Depending on the applicable dimension group, you need to record these dimensions in every inventory transaction.

Figure 7-15:

Editing a warehouse in the warehouse form

In order to set up a new warehouse, open the menu item Inventory management> Setup> Inventory breakdown> Warehouses and click the button New. In the new record, enter the warehouse ID, the Name and the Site. The site (see section 10.1.6) is a mandatory field that groups the warehouses within the company from a geographical and financial point of view. The lookup field Type determines whether the warehouse is a regular warehouse (Type “Default”), or a quarantine warehouse, or a transit warehouse. Transit warehouses are used in transfer orders (see section 7.4.4), and quarantine warehouses in quarantine orders (see section 7.4.6). The slider Use warehouse management processes on the tab Warehouse of the warehouse form controls, whether the selected warehouse is subject to the advanced warehouse management. If it is, a further breakdown of the warehouse with the storage dimensions Location, License plate (for pallets and other handling units) and Inventory status is required.

7.4.1.2 Storage Dimensions When you set up warehouse structures, be aware that the storage dimension groups of the released products control the inventory dimensions, which are required in an inventory transaction. If you need locations in a particular warehouse, the storage dimension groups of all involved items have to contain an

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active dimension Location. Since this setting activates locations for all warehouses, you need to set up at least one (pseudo-)location for each warehouse in this case.

7.4.1.3 Inventory Parameters and Journal Setup If you want to enter a manual transaction in inventory, you have to use an inventory journal. Apart from sites and warehouses, inventory journal names are another required setup for the use of inventory journals. You can divide the journals in inventory among two groups:  Inventory journals – For general transactions.  Warehouse management journals – For receipts that are related to orders. Inventory journals are used to register general transactions like item receipts, item issues, item transfers, and inventory counting. In order to set up inventory journals, open the menu item Inventory management> Setup> Journal names> Inventory and enter at least one journal name for each Journal type which is used in transactions. The number sequence in the lookup field Voucher series provides the option to apply a separate number sequence per journal. Warehouse management journals are used for order-related item receipts and include two journal types: Item arrival journals (for the receipt of purchase orders and customer returns) and production input journals (for the receipt of manufactured items in production). In order to create the warehouse management journals, open the menu item Inventory management> Setup> Journal names> Warehouse management. Inventory parameters (Inventory management> Setup> Inventory and warehouse management parameters) contain settings for number sequences, the default unit of measure, and default journal names. On the tab Inventory dimensions, you can select the dimensions which should be shown by default in the inventory journals.

7.4.2

Inventory Journals

Inventory journals are required to record a transaction which is independent of other functional areas like purchasing, sales, or production. In the advanced warehouse management, it is still possible to post transactions with inventory journals, but the transactions usually are recorded on the mobile device.

7.4.2.1 Journal Structure Since inventory transactions have an impact on finance, the voucher principle applies: First you have to enter a journal completely, before you can post it in a second step. There are different journals for general inventory transactions, for item arrivals, and for item counting. They have got a common structure, but are divided among following journal types:

7.4 Business Processes in Inventory         

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Inventory adjustment – Manual updates of the on-hand quantity. Movement – Like inventory adjustment, but with a user-defined offset account. Transfer – Between warehouses or other inventory dimensions. Bill of materials – Consume components and receive the manufactured item. Inventory ownership change – Financial transfer of consignment stock. Counting – Register the actual on-hand quantity and post adjustments. Tag counting – Tags as preparation for counting. Item arrival – Receipt related to a purchase order or sales return order. Production input – Receipt of manufactured items related to a production order.

The journal name setup in the inventory management includes two more journal types, which are used in other modules: The journal type “Project” for item consumption journals in the project accounting module, and the journal type “Fixed assets” for journals that transfer items from inventory to fixed assets in the fixed assets module. When you open an inventory journal, the related list page with the open – not yet posted – journals is shown. If you want to view the posted journals, apply an appropriate filter on the column Posted (you can use the filter pane, the grid filter, or the advanced filter). You can open the journal detail form, which includes a header view and a lines view, with a click on the journal ID shown as a link in the grid.

7.4.2.2 Movement Journals and Inventory Adjustment Journals If you want to record manual changes of the item quantity in inventory, you can use a journal with the type “Movement” or “Inventory adjustment”. The difference between movement journals and inventory adjustment journals is the assignment of the offset account. Movement journals show the field Offset account, in which you select the expense account for the item consumption (or the revenue account for the item receipt). In inventory adjustment journals, the offset account derives from the posting setup and is not shown in the journal lines. You use movement journals, for example, if you want to apply a particular expense account for the item consumption of a department. Since you can enter a default offset account in the journal setup (journal names), you can set up multiple journal names with the related offset account for the different use cases to facilitate the registration. Section 7.1.2 at the beginning of the current chapter explains how to register and to post a transaction in a journal with the journal type “Inventory adjustment”. The list page Inventory management> Journal entries> Items> Movement shows the journals with the journal type “Movement”. In order to register a new movement journal, click the button New in this page and select a Name (journal name) in the Create dialog. In the field Offset account on the tab General of the dialog, optionally

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enter a default for the offset account in the journal lines, before you close the dialog with the button OK. In the detail form that is shown in the lines view next, enter one or more journal lines with the posting date, item number, appropriate inventory dimension values, and quantity (negative for item issues). In the receipt transactions of items that are not subject to a standard price valuation, the cost price is editable (default value is the base cost price in the released product or the applicable active price in the item price form). Make sure to select an appropriate main account in the column Offset account before you post the movement with the button Post in the action pane.

7.4.2.3 Transfer Journals Unlike movement journals and inventory adjustment journals, which are used item issues and receipts, transfer journals are used to record the transfer of inventory from one dimension-combination to another. In most cases, this is the transfer from one warehouse or location to another. But you can also use a transfer journal to change batch numbers, serial numbers, or product dimension values (e.g., the color). In order to register an item transfer, open the menu item Inventory management> Journal entries> Items> Transfer and create a journal with one or more journal lines (similar to an adjustment journal). But in addition to the data entered in inventory adjustment journal lines, you have to enter the applicable inventory dimensions to which the item should be transferred. Enter the Quantity with a negative sign to issue the item from the “fromdimensions” and to receive it at the “to-dimensions”. Once you have completed the journal lines, post the journal with the button Post in the action pane of the journal list page or detail form. Although you enter only one line for a transfer in the transfer journal, the posted inventory transaction consists of two lines. A transfer between, for example, warehouses creates one transaction line for the item issue from the shipping warehouse and one transaction line for the item receipt at the receiving warehouse.

7.4.2.4 BOM Journals Bill of materials journals (BOM journals) are used to post the receipt of a manufactured item together with the consumption of the components. It is also possible to use bill of materials journals the other way around – to record the disassembly of a manufactured item together with the receipt of the components. But be aware, that the cost price of the components is not adjusted in this case (which can cause a negative or positive adjustment of the inventory value). In order to register a BOM journal, open the menu item Inventory management> Journal entries> Items> Bills of materials and create a journal. In a BOM journal, it is

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not required to enter the journal lines manually – you can click the button Functions/ Report as finished in action pane of the BOM journal to create the journal lines.

Figure 7-16:

Report as finished dialog, accessed from the bill of materials journal

In the Report as finished dialog, insert a line with the manufactured item that you want to receive in inventory. If the checkbox in the column Post now is selected, the BOM journal is posted immediately after closing the Report as finished dialog with the button OK. If the checkbox Post now is cleared, the manufactured item and its component are transferred to the BOM journal lines, and you can subsequently edit the journal lines before you post the journal with the button Post.

7.4.2.5 Item Arrival Journals Item arrival journals are used to post an initial item receipt related to a purchase order (see section 3.5.3) or a customer return (see section 4.7.1). Production input journals, which work similar to item arrival journals, can be used to post the receipt of manufactured items related to a production order. In order to register an item arrival journal, open the menu item Inventory management> Journal entries> Item arrival> Item arrival and create a journal (similar to an adjustment journal). In order to specify the reference to a purchase order, switch to the tab Default values in the Create dialog (or in the header view of the detail form), and select the option “Purchase order” in the lookup field Reference before you enter the order number in the field Number. For customer returns, select the Reference “Sales order” and enter the RMA number. If you want to use quarantine management, make sure that the applicable slider in the field group Mode of handling is set to “Yes”.

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Once you have created the journal header, you can optionally click the button Functions/Create lines in the action pane of the list page or detail form to retrieve default values for the item numbers, the inventory dimensions, and the open quantity from the purchase order lines (or the return order lines). In order to post the arrival journal finally, click the button Post in the action pane of the journal list page or detail form. Unlike inventory journals, which immediately post the physical and financial transaction, arrival journals require posting the product receipt and the invoice of the corresponding purchase order (or return order) to generate physical and financial transactions.

7.4.2.6 New in Dynamics 365 Compared to Dynamics AX 2012, the inventory journal forms have been redesigned (with list page, header view, and lines view).

7.4.3

Inventory Counting

In order to determine the actual quantity in inventory, you have to execute physical inventory counting (stocktaking) in the warehouse. Depending on legal and other requirements, periodical counting is necessary to make sure that the posted quantity in Dynamics 365 is in line with the actual on-hand quantity as physically counted. In Dynamics 365, you can either use inventory journals with the type “Counting” or – in the advanced warehouse management – mobile device transactions (see section 8.1.4) for item counting. When you post an item counting journal, the difference between the counted quantity and the quantity in Dynamics 365 is posted as item issue or receipt – similar to the transactions in an inventory adjustment journal. Since the counting difference is calculated as of the counting date, you do not need to stop other transactions in inventory while counting. But if required for organizational reasons, you can lock inventory (set the slider Lock items during count on the tab General of the inventory parameters to “Yes” for this purpose). In this case, a lock is set on the level of warehouse items.

7.4.3.1 Counting Journals In order to register a counting journal, click the button New in the list page Inventory management> Journal entries> Item counting> Counting. On the tab Counting in the Create dialog, you have to select the inventory dimensions which are the basis for the counting journal. Once you have created the journal header, there are two ways to create the journal lines for inventory counting:  Manually – Enter counting journal lines manually.  Automatically – Create counting journal lines from a proposal.

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You can manually enter the counting journal lines with counting date (in the column Date), item number, site, warehouse, and other inventory dimensions as required. The counted quantity has to be entered in the column Counted. The column On-hand shows the corresponding inventory quantity in Dynamics 365 as of the counting date. The discrepancy between the counted and the on-hand quantity is shown in the column Quantity. This quantity is posted as an adjustment when posting the counting journal – depending on the sign with an issue or a receipt transaction. In case of a positive adjustment (receipt transaction), you should review the Cost price in the line details, which you can update if required (except for items with standard cost valuation).

Figure 7-17:

Entering the counted quantity in a counting journal line

If you want to create the counting lines automatically, click the button Create lines/ On-hand (which creates lines for items and related inventory dimension values that are, or have been, on hand) or the button Create lines/Items (which creates lines for all items) in the action pane of the counting journal. In the Create dialog, specify a filter on the tab Records to include (e.g., for counting a particular warehouse). Other parameters in the dialog provide the option to restrict counting on items or on inventory dimensions (e.g., in combination with a filter on a warehouse) with an inventory transaction after the last inventory counting. After creating the counting journal lines manually or automatically, you can optionally print a counting list with the button Print/Counting list in the action pane of the counting journal (before and after entering the counted quantity). Once you have completed the registration and the review of the counting journal, post it with the button Post in the action pane of the journal list page or detail form.

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7.4.3.2 Warehouse Items Warehouse items are the level, at which the counting status is tracked and at which items are blocked while counting (in case locking is activated in the inventory parameters). If there are multiple warehouses and you want to lock inventory while counting, create a warehouse item per released product and warehouse. You can access the warehouse items of a released product with the button MANAGE INVENTORY/Warehouse/Warehouse items in the released product form. A warehouse item at the general level (with empty inventory dimensions) is automatically created when you create a released product. In order to create a warehouse item for an item and a particular warehouse, click the button New in the warehouse item form and select the warehouse on the tab General. If you create a counting journal line with this item and warehouse at a later stage, the counting journal is shown on the tab Counting status of the warehouse item until the journal is posted. If there is no warehouse item for the respective warehouse, counting is tracked in the warehouse item at the general level (with empty inventory dimensions).

7.4.3.3 Counting Groups In order to support the selection of items in the dialog for creating counting lines, you can filter on counting groups. Counting groups (Inventory management> Setup> Inventory> Counting groups) are not only used for grouping and sorting purposes, but they also contain particular settings for counting. A core setting is the Counting code, which controls when to execute counting (periodically, when equal to or below minimum stock, or when there is no stock). You can assign a counting group in the released product (on the tab Manage inventory) or in the warehouse item. If you want to apply the counting code when automatically creating counting lines, set the slider Activate counting code in the dialog for creating counting lines to “Yes”.

7.4.3.4 Reason Codes for Counting You can use reason codes to classify the causes of counting discrepancies. If you want to use reason codes, first set up the required reason codes (Inventory management> Setup> Inventory> Counting reason codes). Then create one or more reason code policies (Inventory management> Setup> Inventory> Counting reason code policies), in which you select whether a reason code is optional or mandatory, and assign the relevant reason code policy to the warehouses (click the button WAREHOUSE/Set up/Counting reason code policy in the warehouse form) or the released products (click the button PRODUCT/Set up/Counting reason code policy in the released form). If counting reason codes are set to be mandatory, you have got to select a reason code in the counting journal lines.

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7.4.3.5 Tag Counting Tag counting (Inventory management> Journal entries> Item counting> Tag counting) is an option to pre-register counting lines. The principle of tag counting is to attach numbered tags to the warehouse locations. When you execute physically counting, write the item number, the quantity, and the applicable inventory dimensions (e.g., warehouse and serial number) on each tag. Then collect the tags and register them in the tag-counting journal. When you post the tag-counting journal, there is no posting of inventory transactions, but a transfer of the lines to a regular counting journal.

7.4.3.6 New in Dynamics 365 Compared to Dynamics AX 7, the counting reason codes are new.

7.4.4

Transfer Orders

Whereas inventory transfer journals are used to transfer items immediately, and without shipping documents, transfer orders provide the option to manage transport times, to track the quantity which is in transit, and to print shipping documents.

7.4.4.1 Setup for Transfer Orders As a prerequisite for the use of transfer orders, you have to set up at least one warehouse with the type “Transit” in the warehouse form. This transit warehouse holds the items for the time of the transport. In addition, you have to assign a transit warehouse to each regular warehouse, from which you issue transfer orders. If the dimension Location is activated in the applicable storage dimension groups, specify a Default receipt location and a Default issue location, usually a dummy location, in the transit warehouse (on the tab Inventory and warehouse management of the warehouse form). Delivery date control is an optional feature in transfer orders (similar to the options in sales orders, see section 4.4.3).

7.4.4.2 Processing Transfer Orders In order to create a transfer order, open the menu item Inventory management> Inbound orders> Transfer order (or Inventory management> Outbound orders> Transfer order) and click the button New in the action pane. The transfer order consists of a header, in which you have to enter the From warehouse and the To warehouse, and lines, which contain the items that are transferred. When you select the From warehouse in the header, the transfer order retrieves the related transit warehouse (shown on the tab General in the header view). In the transfer order lines, enter one or more records with the item number, transfer quantity, and inventory dimensions as applicable.

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Similar to sales order processing, you can execute picking with the basic warehouse processes (see section 4.5.2) or the advanced warehouse processes (see section 8.1.3). And depending on the setup, picking is not mandatory, and you can immediately post the shipment. In order to post the shipment (corresponding to a packing slip in sales), click the button SHIP/Operations/Ship transfer order. In the upper pane of the Shipment dialog, select the option “All” in the column Update to ship the complete quantity (depending on the prior steps, you can alternatively select the picked quantity or the ship-now quantity). The checkbox Print transfer shipment provides the option to print a shipping document. When you click the button OK in the dialog, a transfer to the transit warehouse is posted.

Figure 7-18:

Entering a line in a transfer order

When you receive the item at the destination warehouse, post the receipt. Optionally you can post an inventory registration or item arrival, similar to the options in a purchase order (see section 3.5.3), before posting the receipt. In order to post the final transfer receipt (corresponding to a product receipt in purchasing), click the button RECEIVE/Operations/Receive in the transfer order form. In the Receive dialog, select the option “All” in the column Update (depending on the prior steps, you can alternatively select the registered quantity or the receive-now quantity). Then click the button OK in the posting dialog to post a transfer from the transit warehouse to the destination warehouse.

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7.4.5

321

Item Reservation

Master planning should make sure, that sufficient inventory to cover the future demand of sales orders, production orders, and other issue transactions is available at the time when needed. But in some cases, the supply provided as a result of master planning is not enough to cover a changing demand. This situation can occur if a short-term sales order consumes inventory which is already allocated to another order. You can use reservations to prevent such a situation. Reservations are primarily used for sales order lines and BOM lines in production orders, but you can also use them for any other issue (e.g., vendor returns or transfer orders). Apart from manual reservations, there are automatic reservations. Reservation, which helps to ensure that an item is available for future consumption, works separately from marking (see section 3.7.1), which links posted transactions for valuation purposes.

7.4.5.1 Setup for Reservation Reservation works at item number and inventory dimension level. Dimensions that are selected as Primary stocking in the dimension group (see section 7.2.2) have to be specified when you enter a reservation. A reservation at the lower level of further active inventory dimensions is optional, and you can still change reservations at that level later on. If you use the advanced warehouse management, additional settings in reservation hierarchies are required (see section 8.1.1). In addition to the current on-hand quantity, reservations may include future receipts of purchase orders and of production orders (manufactured items). As a prerequisite for this kind of reservation, it must be enabled in the inventory parameters (slider Reserve ordered items on the tab General). If you enter a sales order line with the setting “Automatic” in the field Reservation on the sub-tab Setup, there is an automatic reservation. The default for the reservation setting in the order line is specified in the item model group (field Item sales reservation) of the item. If the selected reservation setting in the item model group is “Default”, the reservation setting in the order line receives the default from the corresponding field in the order header, which again receives its default from the accounts receivable parameters (lookup field Reservation on the tab General/Sales default values). For the BOM lines in a production order, automatic reservation is controlled by the lookup field Reservation on the tab Setup in the production order header. The related default value is specified in the production control parameters (on the tab General). Unlike sales order lines, production BOM lines are not automatically reserved when creating the order, but when estimating, scheduling, releasing or starting (depending on the reservation option that is selected in the order header).

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7.4.5.2 Working with Reservation If you want to create a manual reservation in a sales order, click the button Inventory/ Reservation in the toolbar of the sales order lines. In the reservation form that is shown next, you can manually enter the reserved quantity in the column Reservation. Alternatively, you can create the reservation with the button Reserve lot in the action pane of the reservation form. With the button Display dimensions in the toolbar of the tab On-hand quantities, you can show applicable inventory dimensions for more detailed control of the reservation at dimension level. If required, you can change or delete the quantity in the column Reservation and enter a quantity in another reservation line. Depending on the related inventory parameter setting, you can reserve only current inventory or also ordered items.

Figure 7-19:

Reserving inventory for a sales order line

Automatic reservations are generated in the background, but you can edit the reservation in the reservation form in the same way as a manual reservation. If the available quantity is not sufficient to cover the automatic reservation, the Autoreservation dialog immediately shows the problem. After reservation, the reserved quantity is shown with the status “Physical reserved” (“Ordered reserved”, if a future receipt is reserved) in the inventory transaction and the on-hand inquiry. The reserved quantity is not available for any other transaction.

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7.4.5.3 Removing Reservation If the on-hand inquiry is showing a reserved quantity which you need for any other purpose, you can remove the reservation. In the on-hand inquiry, which you can access with the button Overview in the On-hand dialog of transaction lines (e.g., the sales order lines) or with the menu item Inventory management> Inquiries and reports> On-hand inventory, you can open the inventory transactions with the button Transactions in the action pane. Select the respective inventory transaction with the issue status “Reserved physical” and click the button INVENTORY/View/Reservation to access the reservation form, in which you can update the reservation as required.

7.4.6

Quarantine and Inventory Blocking

If you want to exclude a particular quantity of an item from the available stock (e.g., because of the test results in quality control), you can alternatively use the following options:  Inventory blocking – Temporary blocking (e.g., for the time of quality testing).  Quarantine management – Transfer to a quarantine warehouse. Inventory blocking, which is primarily used with quality inspection, generates a temporary inventory transaction for blocking. Quarantine management is based on quarantine orders, which post a transfer to a quarantine warehouse. You can create quarantine orders manually whenever necessary, or automatically with every item receipt. When you work with quarantine warehouses, keep in mind that the quarantine order blocks inventory. Just posting an item transfer to a quarantine warehouse does not block inventory. In the advanced warehouse management, inventory blocking is controlled by the inventory status. Quarantine orders are not available for warehouses with advanced warehouse management.

7.4.6.1 Setup for Quarantine Management As a prerequisite for the use of quarantine management, you have to set up at least one warehouse with the Type “Quarantine” in the warehouse form. If you want to use automatic quarantine for item receipts, you have to select the applicable Quarantine warehouse in each regular warehouse, which applies quarantine. Automatic quarantine is used for released products, which are assigned to an item model group with a checkmark in the checkbox Quarantine management.

7.4.6.2 Manual Quarantine The quarantine order form (Inventory management> Periodic tasks> Quality management> Quarantine orders) shows the open quarantine orders. In case you want to view ended quarantine orders, select the checkbox View ended at the top of the form.

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In order to create a new quarantine order, click the button New in the action pane and enter the item number, quantity, site, warehouse, and other inventory dimensions as applicable. On the tab Quarantine inventory dimensions, the default for the quarantine warehouse is the quarantine warehouse of the initial warehouse in the quarantine order. The default for all other quarantine inventory dimensions are the initial dimension values of the quarantine order.

Figure 7-20:

Managing quarantine in the quarantine order form

In the next step, click the button Start in the quarantine order form to transfer the quantity to quarantine. Starting quarantine includes transferring the item to the quarantine warehouse, generating an inventory transaction (without date) for the future transfer back to the initial warehouse and, in order to block other consumption, reserving the item for the transfer back. If you want to scrap the quarantined quantity partly or completely, click the button Functions/Scrap. In order to end quarantine, with or without prior scrapping of a partial quantity, click the button End in the quarantine order form. Ending quarantine posts the transfer back to the initial warehouse and makes the quantity available again. If you want to post the completion of inspections as an intermediate step, click the button Report as finished in the quarantine order. But the item is not available in inventory before ending the quarantine order, which is why you only report as finished if you want to post the transfer back to the initial warehouse separately.

7.4.6.3 Automatic Quarantine When you post an item arrival journal, production input journal, or product receipt, Dynamics 365 automatically creates and starts a quarantine order for items that are assigned to an item model group with selected Quarantine management. The further processing of quarantine works similar to manual quarantine.

7.4.6.4 Inventory Blocking Inventory blocking is typically used in combination with quality orders (see section 7.4.7). But you can also use inventory blocking manually, independently of the quality management functionality.

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In order to block inventory of an item manually, open the menu item Inventory management> Periodic tasks> Inventory blocking and click the button New in the action pane. In the blocking record, enter the item number, the quantity and – on the tab Inventory dimensions – the applicable inventory dimensions. If you expect the item to become available again (like in a quarantine order), set the slider Expected receipts to “Yes”. Depending on the setting for the expected receipt, Dynamics 365 generates one or two inventory transactions that show “Inventory blocking” in the column Reference. If you want to end inventory blocking, simply delete the line in the inventory blocking form.

7.4.7

Quality Management

Quality management in Dynamics 365 is integrated into the supply chain and helps to manage quality processes and issues. It consists of two components:  Quality control – Manage quality orders with quality tests.  Non-conformance – Manage quality issues. Apart from the non-conformance functionality in quality management (Inventory management> Periodic tasks> Quality management> Non conformances), you can use the case management (see section 10.5.2), which offers a more flexible solution, to manage quality issues. For this reason, the focus in this section is on the quality control.

7.4.7.1 Setup for Quality Control As a prerequisite for the use of the quality control functionality, quality management has to be enabled in the inventory management parameters (slider Use quality management on the tab Quality management). For the tests in quality control, following additional setup is required:  Tests – Measure individual characteristics of the tested quantity.  Test variables – Only for tests with results from a list of values.  Test groups – Sequence of tests which have to be executed in a quality order. In order to set up a test, open the menu item Inventory management> Setup> Quality control> Tests and insert a line with test ID, Description, Type (“Fraction” for numbers with decimals, “Integer” for whole numbers, “Option” for distinct values), and Unit (for the Type “Fraction” or “Integer”). For tests with the Type “Option”, you have to create a test variable (Inventory management> Setup> Quality control> Test variables) with the list of possible results, which you enter in the test variable outcomes (access with the button Outcomes in the test variable form). Once tests and applicable test variables are set up, you can create one or more test groups (Inventory management> Setup> Quality control> Test groups). For a test group that you enter in the upper pane of the test group form, you can assign the individual tests in the lower pane. When you enter a test with the type “Option” in the lower pane, select the Test variable and the Default outcome on the tab Test in this

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pane. For the other test types, specify the standard value and tolerances in the field group Test measurement values on this tab. If it is not possible to utilize the tested quantity after the test, select the checkbox Destructive test in the upper pane.

Figure 7-21:

Setting up a test group

If it is required to generate quality orders automatically, you have to set up item sampling and quality associations. Item sampling (Inventory management> Setup> Quality control> Item sampling) determines the test quantity in quality orders that are generated automatically. In the field Quantity specification, you can select to test a percentage or a fixed quantity. As long as a quality order is not finished, the test quantity is blocked by inventory blocking (see section 7.4.6). Set the slider Full blocking on the tab Process of the item sampling form to “Yes”, if it is required to block the complete quantity of a transaction, irrespective of the percentage that is actually tested. Once you have completed the item sampling setup, you can assign item sampling to test groups (in the column Item sampling of the test group form). Quality associations (Inventory management> Setup> Quality control> Quality associations), which are based on items and test groups, control the automatic generation of quality orders. When you set up a quality association, select the Reference type (e.g., “Purchase” for purchase receipts, or “Sales” if you want to execute tests before sales shipping), the item selection (with the options “Table”/ “Group”/ “All”), and the Test group (on the tab Specifications). The fields Event type and Execution on the tab Process determine the trigger for quality order generation. On the tab Conditions, you can restrict the quality association to vendors, customers, or other applicable characteristics.

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If you want to set up a quality association for a group of items, you have to create quality groups (Inventory management> Setup> Quality control> Quality groups) and – with the use of Item quality groups, which you can access with the button Items in the quality group form – assign each relevant item to one or more quality groups.

7.4.7.2 Processing Quality Orders If you want to create a quality order manually, open the menu item Inventory management> Periodic tasks> Quality management> Quality orders and click the button New in the action pane. In the Create dialog, select the Reference type (default is “Inventory”) and, if applicable, further reference data before you enter the Item number, Test group, Quantity, and the required inventory dimensions. The quality order header is subsequently shown in the upper pane of the detail form, the tests as specified in the test group in the lower pane. The tested quantity is blocked by inventory blocking. Once you have finished a test, click the button Results in the toolbar of the lower pane and enter the Result quantity and the related result (Outcome for the test type “Option”, otherwise the Result value) in one or more lines of the result form. Depending on the results of the particular test and the Acceptable quality level, which is specified on the tab Test of the quality order, the column Test result on the tab Overview in the lower pane of the quality order indicates whether the test is passed or not. Once the last test is finished, click the button Validate in the action pane of the quality order. Depending on the results, the column Status in the quality order header then shows “Pass” or “Fail”. Inventory blocking is removed, and the quantity is available again (in case the test is non-destructive). If you need to make sure, that the quantity in the quality order is blocked further on in the event of failed tests, set the slider Quarantine upon validation failure in the dialog when validating the quality order to “Yes”. A related quarantine order, which blocks the quality order quantity, is generated with the validation in this case. If there is an applicable quality association, quality orders are automatically generated when you post the related event (e.g., a product receipt). The Item sampling in the quality association determines the quality order quantity. Depending on the setting Full blocking in the item sampling, the complete quantity or only the quality order quantity is blocked. Processing a quality order that is generated automatically works similar to a manual quality order.

7.4.8

Consignment Inventory

The consignment inventory functionality in purchasing helps to control the physical inventory of items that are still owned by a vendor, but physically stored in the current company. The consignment inventory business processes are covered by following menu items:

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 Consignment replenishment orders – For the initial product receipt.  Inventory ownership change – Journal, in which you post the transfer of the ownership from the vendor to the current company and generate a purchase order as a basis for the vendor invoice. The features, which are currently available, are limited to the core functionality. Consignment inventory is only available for items with inventory model “Standard cost” or “Moving average” (models without inventory closing). Catch weight items and advanced warehouse management are not supported, and restrictions apply to master planning. Consignment inventory in sales, which is inventory stored at the customer site but still owned by the current company, does not require a special functionality. For sales consignment, you can simply set up a warehouse “Warehouse at customer site” which you replenish with a regular transfer order.

7.4.8.1 Setup for Consignment Inventory As a prerequisite for vendor consignment inventory, the inventory dimension Owner has to be activated in the tracking dimension groups (see section 7.2.2) of the relevant items. In addition, create a record in the menu item Inventory management> Setup> Dimensions> Inventory owner for each vendor that supplies consignment inventory (with the vendor number in the column Vendor account). A record with an empty vendor account is created automatically for the current company. In the inventory journals (Inventory management> Setup> Journal names> Inventory), at least one journal name with the Journal type “Ownership change” is required.

7.4.8.2 Working with Consignment Inventory

Figure 7-22:

Entering a consignment replenishment order

A consignment replenishment order (Procurement and sourcing> Consignment> Consignment replenishment orders) with the respective vendor, which works similar

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to a purchase order, is the basis for the physical receipt of consignment inventory. But different to purchase orders, consignment replenishment orders have to be manually entered since it is not possible to generate such an order in master planning. For this reason, assign a coverage group with the coverage code “Manual” (see section 6.3.3) to the items that apply consignment inventory. When you create a consignment replenishment order, enter the order lines with the item number, quantity, site, warehouse, and other inventory dimensions as applicable. At the time you receive the items, you can optionally post the inventory registration in an item arrival journal. Once you post the product receipt with the button CONSIGNMENT REPLENISHMENT ORDER/Generate/Product receipt in the action pane of the replenishment order, the order has got the status “Completed”. The product receipt of a consignment replenishment order does not generate ledger transactions. In the on-hand inquiry and in the inventory transactions, consignment inventory is shown as available quantity with the vendor as Owner (in the applicable tracking dimension) and no inventory value. The menu item Vendor collaboration> Consignment inventory> On-hand consignment inventory gives an overview of the current consignment inventory. Before the inventory ownership change is posted, the use of consignment quantity is restricted to picking list journals in production orders. In order to post the inventory ownership change, open the menu item Inventory management> Journal entries> Items> Inventory ownership change and create a journal (similar to a transfer journal, see section 7.4.2). Once you select the applicable vendor number in the column From owner of a journal line, the current company is shown in the column To owner. If you have already consumed vendor-owned consignment inventory for production, you can generate the ownership change journal lines based on the picked quantity (click the button Functions/Create journal lines from production orders in the action pane of the ownership change journal). Posting the ownership change journal posts a transfer of the tracking dimension Owner to the current company and generates a purchase order with the status “Received”, which is the basis for the later vendor invoice. Similar to the situation after posting a regular product receipt in a purchase order, the on-hand inquiry and the inventory transactions show the status “Received” for the related quantity, and ledger transactions for the physical receipt are posted (if ledger integration is activated for product receipts in purchasing).

7.4.8.3 New in Dynamics 365 Compared to Dynamics AX 7, the consignment inventory is new.

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Case Study Exercises

Exercise 7.8 – Journal Transaction You find 100 units of the item I-## of exercise 3.5 in the main warehouse. Post an appropriate transaction in an inventory adjustment journal. Exercise 7.9 – Transfer Journal The quantity which you have received in exercise 7.8 is transferred to another warehouse. Register and post this transaction in an inventory transfer journal. Then check the transactions and the quantity of the item in the selected warehouse. Exercise 7.10 – Inventory Counting You are asked to execute inventory counting for the item I-## of exercise 3.5 in the main warehouse. The counted quantity is 51 units. Create a counting journal with a line, which you either insert manually or generate automatically (with a filter on the item and the main warehouse). Once you have entered the counted quantity, post the journal and check the on-hand quantity. Exercise 7.11 – Transfer Order A transfer of 60 units of the item, which you have moved in exercise 7.9, back to the main warehouse is required. This transfer should be processed in a transfer order. Before you create the transfer order, make sure that a transit warehouse is assigned to the warehouse from which the item is shipped. Then enter the transfer order and post the shipment. After the shipment, check the inventory transactions and the inventory quantity of the item in all warehouses. Then receive the item transfer in the main warehouse. Exercise 7.12 – Manual Quarantine Because of reported quality issues, you want to block the quantity in the main warehouse which you have transferred in exercise 7.11. Enter a manual quarantine order and select an appropriate quarantine warehouse. Check the on-hand quantity of the item and start the quarantine order. After some time, you get to know that there is no problem with the item. End the quarantine and check the inventory quantity before and after ending. Exercise 7.13 – Manual Quality Order In order to prevent further quality issues, you want to perform quality tests. Create a new test T-## to measure the length of items in centimeters (including decimals). Then create a test group G-## which only includes this test. The standard length is 100 cm with a tolerance of 10 percent above and below. Enter and process a quality order with this test to examine 10 units of the item I-## of exercise 3.5 in the main warehouse. The length of all tested items is 105 cm.

8

Warehouse and Transportation Management

Depending on the requirements, it may be necessary to manage pallets and to track the detailed transactions within the warehouse. In Dynamics 365, the advanced warehouse management provides the necessary functionality for this purpose. Transportation management helps to manage carriers and external transports. It is linked to the advanced warehouse management but can be used independently.

8.1

Advanced Warehouse Management

The advanced warehouse management in Dynamics 365, which provides the option to register transactions on mobile devices, is an enhancement of the basic warehouse functionality. Compared to the basic warehouse management, the advanced warehouse management adds the following features:        

Mobile device support – Warehousing app for small-screen devices. Detailed tracking – With inventory transactions within the warehouse. Flexible setup – With location directives and work templates. Picking waves – Combine warehouse work for shipments. Flexible reservation – With reservation hierarchies. Packing – Special functionality for item packing. Inventory status – Storage dimension for the status of units (e.g., “damaged”). License plate – Storage dimension for handling units (e.g., pallets).

The transactions, which are recorded in the advanced warehouse management, are the inventory registration (item arrival) in purchasing, picking in sales, and similar transactions in production and transfer orders. In the overall process, these transactions are preliminary steps before the physical transaction with the product receipt or the packing slip (see section 7.2.4).

8.1.1

Core Setup for Warehouse Management

Before you can perform the processes in the advanced warehouse management, you have to complete the related setup (in addition to the setup of the basic inventory management). Advanced warehouse management is only used if both conditions are met: The item is assigned to a storage dimension group, in which the advanced warehouse management processes are enabled, and the warehouse is also enabled for advanced warehouse management processes.

8.1.1.1 Parameters and Mobile Device Access In order to be able to register warehouse transactions on a mobile device, download and install the Dynamics 365 Warehousing app, which is available for © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_8

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Android and for Windows 10. In the Warehousing app, enter the required settings for the connection to the applicable Dynamics 365 environment. You can simulate mobile device transactions with the form WHSWorkExecute in the web client. Open the web address https://XXX.com/?f=WHSWorkExecute&cmp=YYY (XXX.com = Dynamics 365 URL, YYY = Company) to access this form. You have to sign in with a Dynamics 365 user before the separate login form for the work user in the warehouse is shown. The warehouse management parameters (Warehouse management> Setup> Warehouse management parameters) contain basic settings for the warehouse management module, including the number sequences in warehouse management.

8.1.1.2 Inventory Status The storage dimension “Inventory status” indicates the status or condition of inventory (e.g., “good”, “damaged”, or “used”). It is only available for items with a storage dimension group, in which the advanced warehouse management processes are enabled. In warehouses with advanced warehouse management processes, the inventory status is the only option to block inventory of such items (quarantine management is not available for these warehouses). As a minimum setup, a status for available inventory has to be created in the inventory status form (Warehouse management> Setup> Inventory> Inventory statuses). This status is required even if there is no need to block inventory with the inventory status. Optionally, set up further status values as required. The checkbox Inventory blocking in the inventory status form controls whether the status blocks inventory (you can still move the blocked quantity within the warehouse). You can specify a default for the inventory status of transactions at multiple levels: At the company level (on the tab General/Inventory status in the warehouse management parameters), at the site level (in the site form), at the warehouse level (in the warehouse form), and in the default item status form (Warehouse management> Setup> Inventory> Default item status). Blocking via inventory status is making use of the regular blocking feature in inventory (see section 7.4.6). You can find more details on how to change the inventory status in order to block or unblock an item in section 8.1.4 of this book.

8.1.1.3 Warehouse-Related Settings Before you can create a warehouse that uses the advanced warehouse management processes, the following setup is required:    

Location formats – Specify the structure of location IDs. Location types – Indicate the purpose of a location. Location profiles – Control available options in a location. Warehouses, locations – Show the physical structure of the warehouses.

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Location formats (Warehouse management> Setup> Warehouse> Location formats) provide a flexible setup for the structure of location IDs. You can, for example, compose the location ID of a combination of the aisle, rack, and position ID. Since it is a required setup, you need to create at least one format with its segments. Location types (Warehouse management> Setup> Warehouse> Location types) are used for filtering and grouping. At least the location type for final shipping locations, which has to be selected in the field Final shipping location type on the tab General/ Location types of the warehouse management parameters, is required. If you use staging or packing, the related location types have to be set up and selected in the warehouse management parameters. Further location types are optional. Location profiles (Warehouse management> Setup> Warehouse> Location profiles) group locations with common characteristics. These characteristics include the location format and settings on license-plate tracking, mixed items, mixed inventory status, and cycle counting.

Figure 8-1:

Setting up a location profile

When you create a location profile, select the appropriate Location format. In location profiles for regular locations, the slider Allow cycle counting should be set to “Yes” to make counting possible. In location profiles that are assigned to locations on which you want to track the quantity per license plate (prerequisite to track, for example, pallets) the slider Use license plate tracking needs to be set to “Yes”. For the assigned locations, all receipts and issues have to include the license plate in this case. The location profile for user locations is selected on the tab General/Location profiles in the warehouse management parameters. Location profiles for shipping and for

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staging locations have to include the Location type for shipping or for staging (selected in the warehouse management parameters). Warehouses (Warehouse management> Setup> Warehouse> Warehouses) are entered as described in section 7.4.1. In addition to the general settings, there are settings for advanced warehouse management on the tab Warehouse. In order to create a warehouse that uses the advanced warehouse management processes, insert a new record in the warehouse form and immediately set the slider Use warehouse management processes to “Yes”. You can access the related warehouse locations with the button WAREHOUSE/View/Inventory locations in the warehouse form. In the location form, you can click the button Location setup wizard to create multiple locations in a convenient way. For each location, the selected location profile determines the characteristics of the location (e.g., the location ID format, the location type, or settings whether to allow different items in one location). In a typical warehouse, you can find at least the following types of locations:    

Receiving location – Intermediate location for purchase receipts. Shipping location – Last location for sales shipping (bay door). Buffer locations – Storage locations for pallets and bulk items (bulk area). Floor locations – Storage locations for single items (picking area).

If there is the need to prepare the shipments on separate locations before the transfer to the shipping location, set up one or more staging locations with the appropriate location type. User locations – used as intermediate locations for the time between picking from one location and putting to the other location (handling time, e.g., for driving a forklift) – are automatically generated when you create a warehouse user. Once you have completed the location setup, close the location form and select a Default receipt location for the warehouse on the tab Inventory and warehouse management in the warehouse form.

8.1.1.4 Basic Setup for Warehouse Work Activities in the warehouse are reflected by “warehouse work” in Dynamics 365. In general, warehouse work always consists of a pair of activities – picking from one location and putting to another location. There are two basic types of work in Dynamics 365:  Predefined work – For predefined activities, like processing a sales shipment, work is generated in advance (based on work templates). Warehouse workers report the actual execution of the planned work later.  Unprompted work – Unprompted work, like a manual quantity adjustment, is created and reported at the time when you execute the activity. Unprompted work does not require specific setup. For predefined work, the following setup is necessary:

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 Work classes – Group and to characterize work.  Work templates – Determine what to do (e.g., “Pick” or “Put”).  Location directives – Determine where to pick or put (e.g., location “01-001”). Work classes (Warehouse management> Setup> Work> Work classes) for predefined work represent the different types of work that are processed on mobile devices. The field Work order type groups the work classes by source document type (e.g., “Raw material picking”). Work classes are used to link mobile device menu items with work templates:  Mobile device menu items – In mobile device menu items for work registration, the work class determines which work you can register in the menu item.  Work templates – In the work templates for predefined work, the work class is a mandatory field which links the work template to mobile device menu items.

Figure 8-2:

Setting up a work template for purchase put-away

Work templates (Warehouse management> Setup> Work> Work templates) are the basis for automatically generating predefined work. When you open the work template form, first select a Work order type (e.g., “Purchase orders” for item arrival related to purchase orders) in the lookup field at the top of the form. If you want to create a new work template, click the button New in the action pane. The upper pane subsequently shows a new record with the next available Sequence number. If you need to specify filter criteria, which are used for the selection of a work template when automatically creating predefined warehouse work, click the button Edit query. Since the sequence number, which is an editable field, determines the search sequence for the applicable template when creating work, templates with more specific criteria should be first in the sequence.

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Once you have saved the work template header, switch to the tab Work template details and enter a line with the Work type “Pick” and a line with the Work type “Put”. If required, you can enter additional lines – for example with the Work type “Print”. Location directives (Warehouse management> Setup> Location directives) determine the location on which the warehouse work has to be executed. Examples are the location directives for the Work order type “Purchase orders” and the Work type “Put”, which determine the location to which to put an item after receiving a purchase order in the warehouse.

Figure 8-3:

Setting up a location directive for purchase put-away

In the location directive form, select the relevant Work order type at the top of the list pane on the left first. The related location directives are subsequently shown below. On the tab Location directives in the right pane, you can view the Work type (“Pick” / “Put”) of the location directive that is selected in the list pane on the left. The fields Site and Warehouse on this tab, and the filter criteria in the dialog that you can access with the button Edit query in the action pane, control which location directive is selected automatically for a source document (e.g., a purchase order line with its warehouse and item).

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On the tab Lines, you can enter an additional filter on quantity and units. The column Unit refers to the from/to quantity columns. If you want to set up a directive for a particular unit, select the checkbox Restrict by unit and enter the unit in the form, which you access with the button Restrict by unit in the toolbar of the tab Lines. In this way you can, for example, enter a line which moves full pallets to buffer locations and another line which moves individual units to floor locations. The tab Location Directive Actions contains the setting, to which location(s) to put (in directives with the Work type “Put”) or from which to pick (in directives with the Work type “Pick”). The filter criteria, which determine these locations, have to be entered in the filter dialog, which you access with the button Edit query in the toolbar of this tab. In the filter dialog, you can also specify sorting criteria on the tab Sorting (e.g., referring to the column Sort code in the warehouse locations). If there are products with batch numbers, select the checkbox Batch enabled in the location directive action of directives for the work type “Pick” (in an additional line if you got some items with and other items without batch control). The Sequence number of the location directives (and of the Lines within a directive, and of the Location directive actions within a line) is an editable field that determines the search sequence for the applicable record when creating work. For this reason, directives, directive lines, and location directive actions with more specific criteria should be first in the sequence.

8.1.1.5 Basic Setup for Shipments Load templates (Warehouse management> Setup> Load> Load templates) represent the different inbound and outbound transportation units (e.g., the different container or truck sizes). They are the basis for generating a load in an outbound shipment (see section 8.1.2). Waves collect orders which are released for picking at the same time. The required setup for waves includes wave process methods and wave templates. Wave process methods (Warehouse management> Setup> Waves> Wave process methods), which are generated by the application, determine the available steps for wave processing. You can initialize the methods with the button Regenerate methods. Wave templates (Warehouse management> Setup> Waves> Wave templates) contain settings for the picking work – for example regarding the grouping of work, automated steps, and applicable methods. In wave templates that specify an automatic wave creation (the slider Automate wave creation in the template is set to “Yes”), you can click the button Edit query to specify the filter criteria that are used for the search of the applicable template when automatically creating a wave. For these templates, the sorting controls the search priority (like in work templates and location directives).

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Figure 8-4:

8 Warehouse and Transportation Management

Updated wave template for manual wave creation

8.1.1.6 Setup for Mobile Devices Before you can view menus and menu items in the Warehousing app devices, the corresponding setup needs to be completed. In the warehouse management, you can flexibly set up multiple menu according to the requirements in the warehouse for this purpose and individual warehouse workers to the respective menu.

on mobile advanced structures assign the

The required mobile device setup in Dynamics 365 includes the following items:  Mobile device menu items – Determine the available forms on mobile devices.  Mobile device menus – Determine the menu structures. Mobile device menu items (Warehouse management> Setup> Mobile device> Mobile device menu items) determine the forms that are available on mobile devices. The primary setting for a menu item is the lookup field Mode: The mode “Work” refers to warehouse work (the registration of transactions), the mode “Indirect” includes inquiries and common features like logging off.

8.1 Advanced Warehouse Management

Figure 8-5:

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Setting up a mobile device menu item for purchase put-away

For menu items with the mode “Work”, the slider Use existing work determines whether the menu item is used to register predefined work (work, which has been generated on the basis of a work template before). In a menu item that creates work (required to execute work that is not predefined), set the slider Use existing work to “No” and select the applicable work item in the field Work creation process on the tab General (e.g., “Adjustment in”). In menu items for existing work (required to execute predefined work), set the slider Use existing work to “Yes”. The lookup field Directed by in this case controls whether the system (“System-directed”) or the user (“User-directed”) selects which work to execute. For User-directed work, the warehouse user has to enter or scan the work ID of the executed work (which means that he decides on the selection), whereas for System-directed work the device (mobile device menu item) shows which work to do next. In case the option “User grouping” or “System grouping” is selected in the field Directed by, the worker can register multiple work lines with pick-transactions on the mobile device, then press the button Done, and finally register one common or multiple separate put-transactions (controlled by slider Group put away).

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The work classes selected on the tab Work classes in menu items for existing work determine the work which you can register in the particular menu item. If there is, for example, only one line with a work class “Purchase” on this tab, you can only execute work that is generated from a work template line with the work class “Purchase” (and not a “Sales” work). Mobile device menus (Warehouse management> Setup> Mobile device> Mobile device menu) control the menu structure of the mobile device menu items. You can set up multiple menus and submenus.

8.1.1.7 Work User Settings It is not required to set up Warehousing app users as regular Dynamics 365 users. But the warehouse users on a mobile device are workers in the human resources module (see section 10.2.2).

Figure 8-6:

Setting up a warehouse worker

Based on the worker record in human resources, you can create the companyspecific warehouse workers in the menu item Warehouse management> Setup> Worker. For each worker, enter one or more work users on the tab Users. The user ID and password for the work user are used for the login on the mobile device. The Menu name, which controls the available menu and menu items for the worker, and the Default warehouse are specified on the tab Users. If you create multiple users for a worker, you can assign different menus and warehouses to the worker. For work users who switch between warehouses, click the button Warehouses in the toolbar of the tab Users to open a form in which you enter the warehouses. Creating a work user creates a location (used as an intermediate location while executing warehouse work) on the warehouses of the user automatically.

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8.1.1.8 Product-Related Settings In the released product, the following setup is required for the advanced warehouse management:  Storage dimension groups – Enable advanced warehouse management.  Reservation hierarchies – Control the inventory dimensions for reservation.  Unit sequence groups – Control the available units of measurement for warehouse transactions. The storage dimension group in the released product controls, whether the item is using the advanced warehouse management. At least one storage dimension group (Product information management> Setup> Dimension and variant groups> Storage dimension groups), in which the slider Use warehouse management processes on the tab Warehouse specific setup is set to “Yes”, is required for the advanced warehouse management. This setting activates the inventory dimensions Inventory status and License plate. Reservation hierarchies (Warehouse management> Setup> Inventory> Reservation hierarchy) determine for products that use the advanced warehouse management, which inventory dimensions are available for reservation in sales orders, transfer orders, related shipments, and other outbound transactions:  Dimensions for order reservation – Dimensions above the dimension Location in the reservation hierarchy are subject to a reservation in order lines.  Dimensions for warehouse reservation – The location and the dimensions below the location in the reservation hierarchy are subject to a reservation in the warehouse (reserving when generating warehouse work). The selected dimensions in the reservation hierarchy of an item have to comply with the active storage and tracking dimensions of the item. For this reason, the setup of the reservation hierarchies depends on the inventory dimensions which are used. The reservation hierarchy setting is primarily important for items with batch or serial number control because it controls whether you can (and have to) reserve batch/serial numbers already in the order line, or later in the warehouse. Unit sequence groups (Warehouse management> Setup> Warehouse> Unit sequence groups) control for the assigned items, which units of measurement you can use for moving and storing the product within the warehouse. The available units in a unit sequence group have to be entered on the tab Line details of the unit sequence group form. The checkboxes Default unit for purchase and transfer and Default unit for production in the unit sequence group determine the unit that is used as default value when receiving an assigned item. With the default unit, you can, for example, specify to receive a particular item in pallets. The checkbox License plate grouping controls whether a separate license plate per unit (e.g., pallet) or one license plate for the whole quantity (in the selected unit) is generated when

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receiving an item. As a prerequisite for this grouping, the slider License plate grouping has to be set to “Yes” in the applicable mobile device menu items.

Figure 8-7:

Setting up a unit sequence group with the units “ea” and “PL”

When you create a released product (Product information management> Products> Released products) that should use the advanced warehouse management, select an appropriate storage dimension group (for advanced warehouse management), a reservation hierarchy (edit with the button PRODUCT/Set up/Reservation hierarchy), and a unit sequence group (field Unit sequence group ID on the tab Warehouse). Depending on the units in the selected unit sequence group, related unit conversions are required for the item. Apart from the weight and the physical dimensions (depth, width, height) on the tab Manage inventory in the released product, there is the physical dimension form (access with the button MANAGE INVENTORY/Warehouse/Physical dimensions in the released product) in which you enter the physical dimensions of the item in the units of the unit sequence group. Weight and physical dimensions can be used to calculate the utilization of location capacity and transportation loads.

8.1.1.9 New in Dynamics 365 Compared to Dynamics AX 7, the mobile device portal has been replaced by the Warehousing app.

8.1.2

Core Warehouse Processes

Warehouse transactions include inbound processes (e.g., purchase order receipts, transfer order receipts, or product receipts in production) and outbound processes (e.g., sales order shipments, transfer order shipments, or picking in production). Figure 8-8 below gives an overview of the warehouse layout and the structure of the warehouse work, which is used as a basis for the warehouse transactions.

8.1 Advanced Warehouse Management

Figure 8-8:

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Warehouse layout and the structure of warehouse work

In the overall process, the mobile device transactions are another way for recording the inventory registration in purchasing (see section 3.5.3), the picking list in sales (see section 4.5.2), and equivalent transactions in production and transfer orders.

8.1.2.1 Purchase Order Receipt The starting point for a purchase order receipt in the warehouse is a purchase order line with a product and a warehouse which both are enabled for advanced warehouse management. The receipt process then includes the following steps:  Initial receipt – Receive the item in the default receipt location.  Put away – Move the item from the receipt location to the final location.  Product receipt – Post the product receipt in the Dynamics 365 web client. In section 8.1.3, you can find a description of further options for purchase receipts on the mobile device. The initial receipt of a purchased item is not based on work that is created upfront but generates work when posting the receipt. Applicable mobile device menu items include the following settings: Mode “Work”, Use existing work “No”, Work creation process “Purchase order line receiving” (enter the order number and line number when receiving) or “Purchase order item receiving” (enter the order number and item number when receiving). In order to record the initial warehouse receipt on the mobile device, open the corresponding menu item on the mobile device and enter or scan the purchase

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order number and the line number (or the item number). The default for the Unit in the receipt is specified in the unit sequence group, but you can select a different unit (specified in the unit sequence group), and you can reduce (split) the quantity. Depending on settings in the mobile device menu item (slider Generate license plate), the license plate that identifies the handling unit (e.g., a pallet, a box, or an individual piece) has to be entered/scanned manually in the field LP (from a preprinted tag), or is generated from a number sequence (which requires to print the tag when receiving). Dynamics 365 then receives the item on the default receipt location of the warehouse. Posting the initial receipt generates warehouse work for the second step, the putaway work (picking the item from the receipt location and putting it to the final bulk or floor location). The applicable work template and location directive determine the details of this work. The work lines, which are to be registered on a mobile device, are shown in the menu item Warehouse management> Work> All work.

Figure 8-9:

Registering the initial receipt and picking for the put-away

In order to register the put-away work on the mobile device, open an applicable menu item on the mobile device (required settings: Mode “Work”, Use existing work “Yes”, Work class as specified in the work template that has been automatically selected when generating the work). Depending on the setting in the field Directed by of the menu item, the mobile device displays the next work (if “Systemdirected”), or you have to enter/scan the work ID or the license plate (if “Userdirected”) of the put-away work. After you have finished picking on the receipt location, the mobile device shows the put location (based on the location directive). Depending on settings for the work user (slider Allow put location override on the tab Work in the work user form), you can override the put-location. Once the registration of the inbound transactions on the mobile device is finished, the product receipt has to be posted in the Dynamics 365 web client (see section 3.5.4). But whereas a purchase order confirmation is not required for the inventory registration, no matter whether the registration is posted with an item arrival

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journal or with a mobile device transaction, the order has to be confirmed before you can post the product receipt. When you post the product receipt in the purchase order form or in a summary update, select the option “Registered quantity” (or “Registered quantity and services”) in the lookup field Quantity of the posting dialog to make sure that the product receipt refers to the quantity that has been registered on the mobile device. Apart from the options for posting the product receipt in the procurement module, which require entering a Product receipt number in the Posting product receipt dialog, there is the menu item Warehouse management> Periodic tasks> Update product receipts which does not require a product receipt number and which you can submit to a batch process.

8.1.2.2 Sales Order Shipment The starting point for a sales order shipment in the warehouse is a sales order line with a product and a warehouse which both are enabled for advanced warehouse management. The basic shipment process then includes the following steps:       

Reservation – Reserve the item before shipment. Shipment – Create the shipment and include the item. Load – Create a load for external transportation (before or after the shipment). Wave – Create and release a picking wave with the shipment. Warehouse work – Execute the picking work on the mobile device. Confirm shipment – Close the shipment. Packing slip – Post the packing slip in the Dynamics 365 web client.

Before you can start to process a shipment in the advanced warehouse management, you have to make sure that the item is reserved. The inventory dimensions of the reservation are controlled by the applicable reservation hierarchy. In order to reserve an item manually, open the item reservation form with the button Inventory/Reservation in the toolbar of the sales order line. But depending on settings for reservation, there may be an automatic reservation. Shipments (Warehouse management> Shipments> All shipments) represent separate deliveries. If you want to ship a complete sales order, you can create the shipment with the button WAREHOUSE/Actions/Release to warehouse in the sales order form. Alternatively, there is the batch job Warehouse management> Release to warehouse> Automatic release of sales orders to create shipments. This batch job applies related settings in the accounts receivable parameters (on the tab Warehouse management) and in the customer form as minimum criteria for releasing. Creating the shipment sets the Release status of the sales order (shown in the corresponding column of the sales order list page) to “Released”. If there is a load already before you create the shipment (e.g., for transportation planning purposes), you have to generate the shipment from the load in the load planning workbench (see section 8.2.2).

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Figure 8-10:

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Creating a load for a shipment

A load (Warehouse management> Loads> All loads) represents an inbound or outbound transportation unit (e.g., a container or a truck). There is an n:n relation between loads and order lines: A load can include one or more shipments, but you can also split a sales order line into multiple shipments and loads (for example, if the transportation unit is too small to cover the complete order line quantity). There are following options to create a load:  Before creating the shipment – Create the load in the load planning workbench.  After creating the shipment – Create the load in the shipment form.  Skip creating the load – Processing the wave in a later step creates the load automatically in this case. If you want to create a load from the shipment, click the button SHIPMENTS/ Shipments/Transfer shipment to new load in the shipment form. If you want to ship multiple orders together, add them to a common load (click the button SHIPMENTS/ Shipments/Transfer shipment to existing load). Depending on warehouse management parameter settings, loads are already created automatically at order entry. A wave (Warehouse management> Outbound waves> Shipment waves> All waves) is a group of shipments that are to be processed together in the warehouse. Depending on settings in the applicable Wave template, waves are created and processed automatically. If you need to create the wave manually, click the button New in the wave form and select a wave template in the Create dialog. Then click the button WAVE/Wave/ Maintain shipments in the wave form to open the Maintain shipments form. The tab

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Shipments not on a wave in the Maintain shipments form shows all shipments which are ready for processing. Click the button Add to wave in the toolbar of this tab to add a shipment to the wave. Shipments, which are already included in the selected wave, are shown on the tab Wave lines in the Maintain shipments form and in the wave detail form.

Figure 8-11:

Processing a shipment wave

The workspace Outbound work planning provides another way to create a wave. For the Warehouse that you select in the upper pane of the workspace, the shipments are shown in the list Shipments not on a wave in the center. Select one or more shipments and click the button Add to new wave in the toolbar of the list to create a wave with these shipments. In the next step, the wave has to be processed. If wave processing is not executed automatically, click the button WAVE/Wave/Process in the wave form. Processing a wave generates the warehouse work. You can view this work in the work form, which you can access in the menu item Warehouse management> Work> All work or with the button WAVE/Related information/Work in the action pane of the wave form. But at this stage, the Wave status of the wave is “Held”, and the work is blocked (shown in the column Blocked wave in the work list page). Before you can start to execute the actual warehouse work, you have to release the wave with the button WAVE/Wave/Release in the wave form. Depending on the wave template, some or all of the described steps for creating and processing a wave are executed automatically and are not to be done manually for this reason. In case of errors in wave processing (e.g., because of a missing location directive), the list page Warehouse management> Work> Work exceptions log shows the relevant messages.

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Registering the pick transaction and the put transaction on the mobile device

In order to process the wave in the warehouse, open a menu item for sales order picking on the mobile device (required settings: Mode “Work”, Use existing work “Yes”, Work class as specified in the work template that is selected automatically when processing the wave). Depending on settings in the work template (field Directed by), the next picking work is shown (in case of “System-directed”), or you have to enter or scan (usually scanning from a printed work list) the work ID of the work. After picking the item from the displayed location (specified in the location directive for the work type “Pick”), put the item to the displayed final shipping location or staging location (specified in the location directive for the work type “Put”). Depending on settings specified in the work user form, you can override the pick- and the put-location. Settings in the work template and in the wave template control, whether there are additional steps for staging and for replenishment. Putting an item to the final shipping location as the last step on the mobile device sets the status of the inventory transaction to “Picked”. Once you have finished the warehouse processes on the mobile device, confirm the shipment to close the shipment and the load. Apart from automatically confirming by the use of appropriate work audit templates, there are the following options for manually confirming a shipment:  In the shipment form – Button SHIPMENTS/Shipments/Confirm shipment (only available if the load does not contain multiple shipments).  In the load form – Button SHIP AND RECEIVE/Confirm/Outbound shipment.  In the load planning workbench – Button Ship and receive/Outbound shipment on the tab Loads. Once the shipment is confirmed, post the packing slip with the button SHIPMENT/ Generate/Packing slip in the shipment form (select the checkbox Display closed shipments if the shipment is not shown). Alternatively, you can post the packing slip in the load form (button SHIP AND RECEIVE/Generate/Packing slip), or in the load planning workbench (button Generate/Packing slip in the toolbar of the tab Loads), or in the sales order form (see section 4.5.4).

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8.1.2.3 New in Dynamics 365 Compared to Dynamics AX 7, the mobile device portal has been replaced by the Warehousing app, and there is the option to post product receipts in a batch job.

8.1.3

Advanced Options for Inbound and Outbound Processes

In addition to the basic process for purchase order receipts and sales order shipments, there are variants of these processes, including the option to automatize steps. Transfer orders and production orders are further variants of the inbound and outbound processes.

8.1.3.1 Task Automation Apart from the manual execution of activities, there is the option to perform tasks automatically. Depending on the setup, the following options are available:  Work execution – Automatically execute warehouse work. o Automatically process – Select the checkbox Automatically process in the work template to execute the work automatically when releasing a wave (e.g., for bulk items not tracked in detail). o Work confirmation setup – Click the button Work confirmation setup in the respective mobile device menu item to open the Work confirmation form, in which you can select the checkbox Auto confirm in lines with the Work type “Put” (you only register the pick work on the mobile device in this case).  Picking process – Automatically create/release shipments/loads/waves. o Release to warehouse – Automatically create shipments with the batch job Warehouse management> Release to warehouse> Automatic release of sales orders (specify the required Fulfillment policy on the tab Warehouse in the customer form or, at a general level, on the tab Warehouse management in the accounts receivable parameters). o Automate wave creation – The slider Automate wave creation in the wave templates controls automatic wave creation when releasing to warehouse. o Automatically process waves – Sliders in the wave templates control automatic wave processing when releasing to warehouse or when reaching the threshold in the wave template (in batch or online, depending on the slider Process waves in batch on the tab General/Wave processing in the warehouse management parameters). o Automate wave release – The slider Automate wave release in the wave templates controls automatic wave releasing. o Automatically create loads – Slider on the tab Loads in the warehouse management parameters; independently of this setting, loads are always automatically created when processing a wave for which no load has been created before. Reservation is automatically executed when entering a sales order line if the general parameters for reservation are set up accordingly (see section 7.4.5). Apart

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from the general settings, there are – on the tab Warehouse in the warehouse form – the sliders Reserve inventory at load posting (reserving when releasing to warehouse from the load planning workbench) and Reserve when orders are released by a batch job (reserving in the course of the batch job Warehouse management> Release to warehouse> Automatic release to warehouse) that provide further options for the automatic reservation in the advanced warehouse management. With work audit templates (Warehouse management> Setup> Work> Work audit template lines update), you can assign additional actions to a mobile device menu item. If you select an audit template that contains a line with the Function “Event” and the Event “Shipping confirmed” in a mobile device menu item for sales shipments, each shipment for which you execute the warehouse work with this menu item is automatically confirmed. Further features in the audit template lines include the option to display and to print data.

8.1.3.2 Options for Purchase Receipts In the advanced warehouse management, there are the following options for purchase order receipts:  Two-step order receipt – Receive with reference to the purchase order number and separately put away in a second step (described in section 8.1.2).  Load item receipt – Receive with reference to the load (instead of the order).  One-step receipt – Receive and put away in one step. A load item receipt is based on an inbound load, which includes one or more purchase orders. As a prerequisite for load item receipts, set up a mobile device menu item with the Work creation process “Load item receiving”. If you enter a purchase order and create a load in the load planning workbench (see section 8.2.2), you can select the Load ID (instead of the purchase order number) when registering the receipt with this mobile device menu item. Receiving generates put away work, which has to be executed in the same way as a purchase order receipt. Apart from the two-step receipt, which requires posting the receipt on the default receipt location and the put-away to the final location in two separate steps, you can execute a one-step receipt to move the item to the final location immediately. As a prerequisite for one-step receipts, create a mobile device menu item with the Work creation process “Purchase order item receiving and put away”, or “Purchase order line receiving and put away”, or “Load item receiving and put away”. With these menu items, receiving and putting away is done in one common transaction.

8.1.3.3 Storage Utilization and Limits When Dynamics 365 searches a location for a put transaction, for example for the put away of a purchase receipt, it selects the first location with available storage capacity. The search sequence is specified on the tab Sorting in the query that is assigned to the applicable location directive (on the tab Location Directive Actions). For the definition of the capacity of a location, there are two different options:

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 Location stocking limits – In the menu item Warehouse management> Setup> Warehouse> Location stocking limits, you can enter the maximum quantity of a unit (unit of the unit sequence group) per location. This maximum quantity can be specified at various levels, for example for a location profile (this record determines the maximum quantity for all locations with that profile).  Dimension settings in the location profile – On the tab Dimensions in the location profile, you can specify the capacity of the locations in terms of weight and physical dimensions (depth, width, height). If the dimension settings in the location profile are used, the location capacity and the required storage capacity (weight, volume) of released products are the basis for the calculation whether there is capacity left for storing a product on a location. Other settings in the location profile (e.g., the slider Allow mixed items) control whether it is possible to put an item to a location with current inventory. If you want to get an overview of the available capacity, run the report Warehouse management> Inquiries and reports> Warehouse monitoring reports> Warehouse utilization.

8.1.3.4 Directive Codes When generating warehouse work, Dynamics 365 searches for the applicable work template and for the location directive separately. If you want to link a work template to a location directive, use directive codes This is useful, for example, if you want to use a work template for some items, which includes staging as a separate step that has to be done on a special location. Following setup is required for the use of directive codes:  Directive code (Warehouse management> Setup> Directive codes) – Create a code.  Work template – Select the Directive code in applicable work template lines (only in “Put” work template lines of outbound processes).  Location directive – Select the Directive code in location directives as needed. When you create work that is based on a work template with an assigned directive code, Dynamics 365 does not search the location directive separately but applies the location directive with the same directive code.

8.1.3.5 Staging Staging is an optional step after picking. You use staging to collect and to prepare shipments on separate locations before you transfer the items to the final shipping location, on which you execute loading (e.g., truck loading). In addition to the basic configuration for sales order shipments, the following setup is required for staging:  Directive code – Additional directive code for staging.  Work template – Contains work lines for staging and for loading.

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 Location directive – Location directive to put to the staging location.  Mobile device menu items – Contain the Work class of the work template lines. In order to link the “Put” work template line for staging to the related location directive, enter a directive code in this work template line. In the “Pick” line below this “Put” line, select the checkbox Stop work to prevent that picking from the staging location is shown as next activity on the mobile device immediately after putting to the staging location.

Figure 8-13:

Work template for staging

Then set up a location directive (with the directive code of the “Put” work) for putting to the staging location. If there is no common location directive – without directive code – for putting to the final shipping location, which you can use after staging, create a separate directive code and location directive for this final put work. In a similar way to the sales order picking process without staging, you can execute the outbound process with staging: Create the shipment, the load, and the wave, and release the wave (applying the work template for staging). The work created from the wave includes four steps in case of staging: Picking from the original location, putting to the staging location, picking from the staging location, and putting to the final shipping location. On the mobile device, the warehouse work for staging (pick from the original location and put to the staging location) and for loading (pick from the staging location and put to the final shipping location) has to be registered in two separate steps.

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8.1.3.6 Work Pools Work pools are used to group work – for example, if you need to collect all work in a particular warehouse zone. In order to use work pools, following setup is required:  Work pool (Warehouse management> Setup> Work> Work pools) – Create a pool.  Work template – Select the Work pool ID in applicable work templates.  Mobile device menu items – Create or adjust menu items for using work pools (Directed by = “System grouping”, System grouping field = “WorkPoolId”). In the work records (Warehouse management> Work> All work), the work pool is an editable field receiving the default from work template. On the mobile device, the work pool displays instead of the work ID when opening a menu item which is configured to use work pools. The work is grouped by the work pool then.

8.1.3.7 Transfer Orders Transfer orders (see section 7.4.4) are used to move items from one warehouse to another. In Dynamics 365, you can execute all combinations of transfers – from and to a warehouse with and without advanced warehouse management. Shipping a transfer order from a warehouse with advanced warehouse management works similar to shipping a sales order, and receiving a transfer order on a warehouse with advanced warehouse management works similar to receiving a purchase order. As a prerequisite for processing transfer orders in a shipping or receiving warehouse with advanced warehouse management, following setup is required (similar to the setup for purchase order receipts and sales order shipments):  Item, warehouse(s) – Enabled for advanced warehouse management (for a transfer between two warehouses with advanced warehouse management, a transit warehouse with advanced warehouse management is required).  Work classes, work templates, location directives – For the work order types “Transfer issue” and “Transfer receipt”.  Mobile device menu items for o Transfer issue – Mode = “Work”, Use existing work = “Yes”, work class for transfer issue. o Transfer receipt – Mode = “Work”, Use existing work = “No”, Work creation process = “License plate receiving” or “License plate receiving and put away” (“Transfer order line receiving”, if the advanced warehouse management is not enabled on the from-warehouse). o Transfer receipt put-away – Mode = “Work”, Use existing work = “Yes”, work class for transfer receipt (only required for two-step receipts).  Wave template – In case you don’t want to use the template for sales shipments.

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Location directive for transfer issues (“Put” work to the shipping location)

The transfer order process in the advanced warehouse management starts with creating a transfer order (Inventory management> Inbound orders> Transfer order) that ships from or to a warehouse with advanced warehouse management. If the advanced warehouse management is enabled on the from-warehouse, the first step is to reserve the item (automatically or manually). Then create a shipment (similar to sales order shipments) by releasing the transfer order to the warehouse manually or automatically – for example with the button SHIP/Operations/Release to warehouse in the transfer order form. Create the load and the wave next, assign the transfer order, process the wave, and release the wave (depending on settings in the wave template, the steps are executed automatically or manually). On the mobile device, you can subsequently execute the picking work in the fromwarehouse (including putting to the final shipping location). Confirming the shipment in the advanced warehouse management, which closes the shipment and the load, posts a transfer to the transit warehouse. In order to receive the item in the to-warehouse, the warehouse worker has to log on to the appropriate warehouse on the mobile device. Executing the transfer receipt work on the mobile device works similar to the receipt of a purchase order. If you receive a transfer from a warehouse with advanced warehouse management, you have to use a menu item for “License plate receiving”, which requires to enter/scan the license plate(s) that have been assigned to the item in the precedent shipping process. If the advanced warehouse management is not enabled on the from-warehouse, you have to use a menu item for “Transfer order

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line receiving” (or “Transfer order item receiving”), which requires to enter/scan the transfer order number. You have to execute the standard transfer order process (see section 7.4.4) for shipping from a warehouse, on which the advanced warehouse management is not enabled. If the advanced warehouse management is not enabled on the towarehouse, the standard transfer order process has to be executed for receiving.

8.1.3.8 Production Orders In a production environment, you can use the advanced warehouse management for material picking and for the receipt of manufactured items. As a prerequisite for processing production orders in the advanced warehouse management, following setup is required (similar to the setup for purchase order receipts and sales order shipments):  Items – Materials and manufactured items enabled for advanced warehouse management.  Warehouse – Enabled for advanced warehouse management; one or more warehouse locations in the production area; Default production finished goods location in the warehouse form.  Production input location – On the resource, resource group, or warehouse (location from which raw material is consumed, which means that it is the “Put” location for warehouse work).  Work classes, work templates, location directives – For the work order types “Raw material picking” and “Finished goods put away”.  Wave template – Separate from sales shipment templates (select the option “Production orders” in the left pane of the wave template form).  Mobile device menu items for o Material consumption – Mode = “Work”, Use existing work = “Yes”, work class for raw material picking. o Finished product receipt – Mode = “Work”, Use existing work = “No”, Work creation process = “Report as finished” (or “Report as finished and put away”). o Finished product put-away – Mode = “Work”, Use existing work = “Yes”, work class for finished product receipt (only required for two-step receipts). In order to use the advanced warehouse management in manufacturing, create and process a production order (Production control> Production Orders> All production orders) as described in section 5.4.2. Depending on the settings for automatic reservation (field Reservation on the tab Setup of the production order detail form), you may have to reserve the raw materials manually after estimation. Once the production order is released, create a production wave (Warehouse management> Outbound waves> Production waves> All waves), assign the production order (button WAVE/Wave/Maintain productions), process the wave, and release the

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wave. Depending on the settings in the applicable production wave template, these steps are executed automatically or manually. Processing the wave creates warehouse work for raw material picking, which you can view with the button WAVE/Related information/Work in the wave form.

Figure 8-15:

Manually creating a production wave

On the mobile device, you can execute the warehouse work for raw material picking (transfer to production input locations) in the next step. Depending on the setting for the Issue status after raw material picking (field on the tab Inventory and warehouse management in the warehouse form), the material is immediately consumed (inventory status “Picked”) or only reserved (inventory status “Reserved physical”) after putting the item to the production input location. In the Dynamics 365 web client, you can subsequently start the production order and post the picking list that refers to the registered warehouse work. In order to receive the manufactured item, open the menu item for “Report as finished” or – for one-step receipts – “Report as finished and put away” on the mobile device (which work similar to a purchase order receipt). The mobile device transaction posts a report as finished journal in production, and receives the product on the Default production finished goods location of the warehouse (or, in case of a one-step receipt, directly on the final floor or bulk location). In case of a twostep receipt, the initial receipt on the mobile device generates warehouse work for the put-away to the final location, which has to be executed in a separate menu item on the mobile device. In order to update the production order status to “Reported as finished”, click the button PRODUCTION ORDER/Process/Report as finished in the production order form. Instead of updating the production order status after receiving the manufactured item on the mobile device, you can also update the production order status to

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“Reported as finished” first. In this case, reporting as finished initially receives the item and – based on the work template for “Finished goods put away” – creates warehouse work for the put-away to the final bulk or floor location.

8.1.4

Tasks within the Warehouse

Apart from inbound and outbound transactions, warehouse operations include internal transactions like counting and movements between locations and tasks like inventory blocking.

8.1.4.1 Inventory Blocking The purpose of inventory blocking is to prevent transactions – for example shipping a pallet (license plate) which has got quality issues. In the advanced warehouse management, you can block inventory by changing the dimension value of the storage dimension Inventory status for an on-hand quantity. This blocking applies the inventory blocking feature in inventory management (see section 7.4.6). Changing the inventory status to block or unblock inventory generates an inventory transaction, which you can view later on. After blocking a quantity in inventory, outbound transactions are not possible. If you receive a purchase order line with the status “Blocked”, the quantity is blocked after the receipt. Following setup is required to use the inventory status for blocking:  Inventory status – Status value with “Inventory blocking” (see section 8.1.1).  Disposition codes – For status changes in parallel to warehouse transactions.  Mobile device menu items – For a change of the inventory status/disposition code on the mobile device. If you want to be able to change the inventory status in a separate registration on the mobile device, create a mobile device menu item with the setting Mode = “Work”, Use existing work = “No”, Work creation process = “Inventory status change”, and include it in the mobile device menu. It is not possible to update the inventory status field in parallel to a warehouse transaction on the mobile device, but you can use the disposition code for this purpose. Each disposition code (Warehouse management> Setup> Mobile device> Disposition codes) can be assigned to an inventory status. If you want to be able to update the inventory status (via the disposition code) when registering the initial receipt in an inbound arrival, set the slider Display disposition code in the applicable mobile device menu items to “Yes”. If the location for the put away of the received items depends on the disposition code, create a particular location directive with the applicable disposition code (e.g., a location directive for the Work order type “Purchase orders” and the Work type “Put” to store damaged items on separate locations).

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Apart from changing the inventory status on the mobile device, you can also update the inventory status in the Dynamics 365 web client:  Inventory status change (Warehouse management> Periodic tasks> Inventory status change) – With flexible filter options.  Warehouse status change (Warehouse management> Periodic tasks> Warehouse status change) – For blocking/unblocking at warehouse level (select the warehouse and the new status in this form, then click the button Details to access the individual items/locations).  On-hand inquiry (Warehouse management> Inquiries and reports> On hand by location) – Button Inventory status change in the toolbar of the tab On hand in the on-hand inquiry by location.  Quality order – Automatically change the inventory status from a quality order if specified in the test group (Inventory management> Setup> Quality control> Test groups, slider Update inventory status on the tab General). On a license plate, a mixed inventory status with partly blocked and partly unblocked inventory is not possible. If you want to block a partial quantity of a license plate, move the required quantity to another license plate and block it there. For locations, you can specify in the location profile whether a mixed inventory status is allowed.

8.1.4.2 Movements and Adjustments Movements and adjustments are manual transactions in inventory. Apart from registering these transactions on a mobile device, you can use regular inventory journals (see section 7.4.2) and enter all required inventory dimensions manually. Movements are used for manual transfers between locations. As a prerequisite for registering movements on the mobile device, a mobile device menu item with the required settings (Mode = “Work”, Use existing work = “No”, Work creation process = “Movement”) has to be set up and included in the mobile device menu. If required, you can use location directives to suggest the put location in a movement (e.g., for the movement from a quality test location to a storage location). For this purpose, the following setup is required:  Mobile device menu item for creating work – Mode = “Work”, Use existing work = “No”, Work creation process = “Movement by template”, Create movement = “Yes”.  Work class, work template, location directives – For the work order type “Inventory movement”.  Mobile device menu item for executing work – Mode = “Work”, Use existing work = “Yes”, work class for inventory movement. Whereas movements are used for transfers, adjustments are used for manual item receipts and issues. Warehouse adjustments generate inventory counting journals that are used to post the inventory transaction. The journal name for these journals

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is specified in the adjustment type (Warehouse management> Setup> Inventory> Adjustment types).

Figure 8-16:

Registering an adjustment on the mobile device

Following setup is required for registering adjustments on the mobile device:  Adjustment types – For grouping purposes, specify the inventory journal name.  Mobile device menu item – Mode = “Work”, Use existing work = “No”, Work creation process = “Adjustment in” (or “Adjustment out”). In order to record an adjustment on the mobile device, select the menu item for “Adjustment in” or “Adjustment out” and enter the transaction quantity by which you want to change inventory. The quantity is always a positive number, in case of an item issue you have to use a menu item “Adjustment out”. The default value for the Adjustment type is specified in the mobile device menu item, or in the warehouse management parameters (tab General/Adjustments).

8.1.4.3 Inventory Counting ’The purpose of counting is to audit the physical quantity of items, and to adjust the quantity in case of discrepancies. The discrepancies that result from counting transactions on the mobile device are posted in a regular inventory counting journal. The adjustment type, and with the adjustment type the journal name, for this counting transaction is specified in the warehouse management parameters. In the advanced warehouse management, you can apply the following strategies for counting:  Periodic counting – In a periodic interval (e.g., annual stocktaking).  Threshold counting – Counting when inventory reaches the threshold limit.  Spot counting – Ad-hoc counting on the mobile device.

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Following setup is required for inventory counting on mobile devices:  Location profile – In the location profile of all locations that are subject to counting, set the slider Allow cycle counting to “Yes”.  Parameters – On the tab Cycle counting in the warehouse management parameters, enter a default work class and a default adjustment type. Select the checkbox Remove reservations in the settings of this adjustment type to avoid that reservation in sales orders (and other issue transactions) blocks counting.  Unit sequence group – Controls the available units for counting. Periodic counting has got the purpose to create and to execute counting work in a regular interval. In addition to the general setup for counting on the mobile device, following setup is required for periodic counting:  Mobile device menu item – Mode = “Work”, Use existing work = “Yes”, work class for cycle counting (click the button Cycle counting in the action pane for additional settings, e.g., how often to re-count in case of a discrepancy).  Warehouse worker – In the work user form, select which counting discrepancy does not require approval (if the worker is a supervisor, no approval is required to post discrepancies).  Cycle count plan (Warehouse management> Setup> Cycle counting> Cycle count plans) – Basis for periodic counting, with filter options on items and locations.

Figure 8-17:

Settings for cycle counting in the mobile device menu item

In the process of periodic counting, you have to generate counting work first. You can create this work (based on cycle count plans) with the button Schedule plan in the menu item Warehouse management> Cycle counting> Cycle count scheduling (or with the button Process cycle counting plan in the cycle count plan setup form). If

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you want to create counting work independently of cycle count plans, execute the periodic activity Warehouse management> Cycle counting> Cycle count work by location or Warehouse management> Cycle counting> Cycle count work by item. Once the counting work is created, you can execute counting on the mobile device with the menu item which is set up for cycle counting. Enter the quantity (including “0”) in all counting units per item and location, and confirm the quantity in case of discrepancies (depending on the settings in the menu item). Depending on settings in the work user, discrepancies between the counted quantity and the current quantity in Dynamics 365 are posted immediately in order to adjust the current quantity. Discrepancies, which are not posted immediately, are shown in the menu item Warehouse management> Work> Warehouse> Cycle count work pending review. Click the button WORK/WORK/Cycle counting in this form to access the cycle counting review form, and, in the review form, click the button Accept count to post the inventory adjustment (if applicable). Threshold counting is a strategy to execute counting automatically when inventory reaches the threshold limit. As a prerequisite for threshold counting, you have to set up a cycle counting threshold (Warehouse management> Setup> Cycle counting> Cycle count threshold). With the buttons Select items and Select locations, you can specify filter criteria for the threshold. Registering an outbound transaction on the mobile device (e.g., picking) then triggers threshold counting if the quantity on the location reaches the cycle counting threshold. If the slider Process cycle counting immediately in the cycle counting threshold is set to “No”, Dynamics 365 generates cycle counting work which has to be executed later on the mobile device (similar to periodic counting work). If this slider is set to “Yes”, a dialog for counting is immediately shown when registering an outbound transaction. Spot counting is an ad-hoc counting on the mobile device. As a prerequisite for spot counting, a mobile device menu item (required settings: Mode = “Work”, Use existing work = “No”, Work creation process = “Spot cycle counting”; access additional counting parameters with the button Cycle counting) has to be set up. With this menu item, you can execute spot counting in a similar way to periodic cycle counting (but you can select any location). Posting the counting transactions and resolving discrepancies also works similar to periodic counting.

8.1.4.4 Replenishment The target of replenishment within the warehouse is to move required items from buffer locations to picking locations as a preparation for an efficient picking process. In Dynamics 365, there are two basic strategies for replenishing locations:  Based on minimum/maximum quantities – Uses minimum and maximum stocking limits on location level.  Based on demand – Replenishment of missing quantity on picking locations, triggered by the picking process for outbound orders.

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Minimum/maximum replenishment aims to fill a location to the maximum if the current quantity is below the minimum (e.g., as first work in the morning to prepare picking). For a minimum/maximum replenishment, the following setup is required:  Replenishment template (Warehouse management> Setup> Replenishment> Replenishment templates) – Replenishment type “Minimum or maximum”, template details lines with the min/max quantity, filter on items and locations.  Work class, work template, location directives – For the work order type “Replenishment”.  Fixed locations for items (Warehouse management> Setup> Warehouse> Fixed locations) – Required if you want to refill empty locations.  Mobile device menu item – Mode = “Work”, Use existing work = “Yes”, work class for replenishment.

Figure 8-18:

Setting up a wave demand replenishment template

If you use a minimum/maximum replenishment, run the replenishment batch job (Warehouse management> Replenishment> Replenishments) to generate replenishment work. In the warehouse, execute the replenishment on the mobile device with the menu item for replenishment. Whereas minimum/maximum replenishment refills locations irrespectively of current picking processes, wave demand replenishment applies if you want to refill a location when processing a wave. Replenishment is only created if there is no quantity available on the location that is selected by the location directive for picking. If you want to use wave demand replenishment, the following setup is required in addition to the regular setup for sales shipments:

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 Replenishment template – With the Replenishment type “Wave demand” and a Wave step code.  Wave template – With the additional method “replenish” and the wave step code of the replenishment template.  Work class, work template, location directives – For the work order type “Replenishment” (match “Put” locations in the replenishment location directive with “Pick” locations in the sales order picking location directive).  Mobile device menu item – Mode = “Work”, Use existing work = “Yes”, work class for replenishment (you can use the same menu item as for minimum/maximum replenishment). If the wave template for the sales order shipments is set to release waves automatically, set the slider Automate replenishment work release in the wave template to “Yes” (replenishment has to be released and executed before sales picking). In order to execute wave replenishment, create the shipment, the load, and the wave for sales order picking (applying the wave template for replenishment), assign the sales order, process the wave, and release the wave (depending on settings in the wave template, the steps are executed automatically or manually). If no quantity is available on the picking location, a replenishment wave with replenishment work is created when processing the wave for sales order picking. The sales order wave is automatically blocked until the replenishment work has been executed. On the mobile device, execute the replenishment work before picking and loading. Apart from wave demand replenishment, load demand replenishment is another type of demand replenishment. The difference between these two replenishment types is, that wave demand is processed automatically (if specified in the wave template) whereas load demand replenishment is to be calculated with a batch job.

8.1.4.5 Warehouse Inquiries You can use inquiries on the mobile device to view the current quantity in inventory. In order to set up such a mobile device inquiry, for example on the onhand quantity per item, create a mobile device menu item with the Mode “Indirect” and the Activity code “Item inquiry”. On the mobile device, you can access this inquiry in the appropriate menu item and enter/scan the item number to view the quantity on the different locations. In the Dynamics 365 web client, the inquiry Warehouse management> Inquiries and reports> On hand by location is one of the main pages for viewing the current inventory in the advanced warehouse management. In order to show the locations with the item quantities, select a warehouse and refresh the page (or select the checkbox Refresh across locations). If you want to change the inventory status of a selected quantity, click the button Inventory status change on the tab On hand.

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Case Study Exercises

Exercise 8.1 – Warehouse Setup In order to investigate the options for the warehouse setup, create a new location format L-## (## = your user ID) with two segments: A segment with a length of one digit, followed by the separator “-” and a 3-digit segment. Then set up a location profile F-## for floor locations and a location profile B-## for bulk locations. Both location profiles refer to the new location format L-## and allow cycle counting, but only floor locations use license plate tracking. Accept the default settings in the other fields of the location profile form. After the basic setup is done, create a warehouse WH-## which applies advanced warehouse management processes. This warehouse has got the receiving location “RECV”, the shipping location “SHIP”, three floor locations (“F-001” to “F-003”), and six bulk locations (“1-001” to “2-003). Floor locations and bulk locations refer to the appropriate location profiles which you have created before. The location “RECV” is the Default receipt location in the warehouse. Exercise 8.2 – Work Template, Location Directive, Wave Template The purchase put-away work for the warehouse WH-## should be registered in separate menu items on the mobile device. Create a new work class PO-## for this purpose. Then create a new work template for purchase orders with one line for pick and one line for put work, which only refers to the warehouse WH-## and this new work class. In addition, create a work template for sales orders which is only available in the warehouse and also contains one line for pick and one line for put work (no staging). The work template lines refer to an existing sales order work class. In order to use the warehouse in purchasing and in sales, related location directives are required. Create a location directive for the warehouse WH-##, which determines to put purchase order receipts to bulk locations in case of full pallets and to floor locations otherwise. Then enter a location directive for sales picking which should pick full pallets from bulk locations. Other units should be picked from floor locations first, and in the second line from bulk locations (if all floor locations are empty). The sales order directive should put items to the location “SHIP”. Finally set up a wave template T-##, which does not apply any automatic action, for the warehouse WH-##. Exercise 8.3 – Mobile Device Menu and Work User A new mobile device menu is required for the warehouse work in the following exercises. Create the following mobile device menu items for this purpose:

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 Menu item “##-PO-Receive” for the initial receipt of purchase shipments (with the Work creation process “Purchase order line receiving”).  Menu item “##-PO-Put” for the transfer from the default receipt location to the final location in purchase receipts (referring to the work class created in exercise 8.2 and Directed by = “User directed”).  Menu item “##-SO-Direct” for sales order picking (referring to the sales order work class selected in exercise 8.2 and Directed by = “User grouping”). Then set up a new mobile device menu “##-Main” with these menu items. In addition, the menu should include a menu item “About” and a menu item for logging off. In the next step, set up a warehouse worker who is linked to any worker employed in the current company. On the tab Work users of the warehouse worker form, enter a user with the user ID X-##, the menu name which you have created in the current exercise, and the warehouse WH-## of exercise 8.1. Exercise 8.4 – Warehouse Management Settings in the Released Product In order to apply the advanced warehouse management to a product, you need an appropriate storage dimension group, a reservation hierarchy, and a unit sequence group. In this exercise, you can use an existing storage dimension group. But you want to create a new reservation hierarchy R-##, which does not contain tracking dimensions, and a unit sequence group U-##, which includes pieces and pallets (pallets as default unit for purchasing). Then create the item I-##-W with the name “##-AdvWarehouseMgmt” in the released product form. It is a stocked product without variants or batch numbers, but you want to use the advanced warehouse processes. Select an item group for merchandise and an item model group with FIFO-valuation. The item does not require approved vendors. The base purchase price and the base cost price is USD 50. The base sales price is USD 100. The unit of measurement for the item is “Pieces” in all areas except purchasing. In purchasing, the default unit for the item are pallets (1 pallet = 10 pieces). Make sure to choose the same units of measurement which you have selected in the unit sequence U-##. Assign the new item to the unit sequence group U-## and to the reservation hierarchy R-##. Note: If the number sequence for product numbers is set up for automatic numbering, don’t enter a product number. Exercise 8.5 – Warehouse Management Processes in Purchasing Enter a purchase order with 34 units of the item I-##-W (of exercise 8.4) from any vendor (e.g., the vendor of exercise 3.2) for a receipt in the warehouse WH-## (of exercise 8.1). Confirm the order and check the inventory transaction which refers to the purchase order line.

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Log on to the mobile device with the work user X-## of exercise 8.3. Open the menu item for receiving the purchase order and post the receipt for the complete quantity of the purchase order. Which status do the inventory transactions of the item show afterward? Open the inquiry “On hand by location” in the warehouse management menu, select the warehouse WH-## and take note of the license plate of the posted quantity. In the next step, open the mobile device menu item for the put-away of the purchase receipt and post the transaction (refer to the license plate shown in the previous inquiry). If you review the inventory transactions and the inquiry “On hand by location” for the warehouse WH-## again, what is different now? Finally, post the product receipt based on the mobile device transactions of the current exercise. Note: In order to register transactions on the mobile device, use the Dynamics 365 Warehousing app (make sure that the Connection Settings in the app provide access to the training company), or use the form WHSWorkExecute which you can access via the web address https://XX.com/?f=WHSWorkExecute&cmp=YY (XX.com = URL of the Dynamics application, YY = Training company). Exercise 8.6 – Warehouse Management Processes in Sales A customer (e.g., the customer of exercise 4.1) orders 12 units of the item I-##-W, which you have purchased in the previous exercise. Enter an appropriate sales order that is shipped from the warehouse WH-##, reserve the quantity, and create the shipment. What is the status of the inventory transactions now? Create a load for the shipment. Then enter, process, and release a wave which is based on the wave template T-## of exercise 8.2. Take note of the Work ID of the warehouse work that has been generated when processing the wave. Check the inventory transactions of the item again, what is different now? Review the inquiry “On hand by location” for the warehouse WH-## and take note of the license plate shown for the floor location. In the next step, log on to the mobile device with the work user X-## of exercise 8.3 and open the mobile device menu item for sales order picking. Post the pick transaction that is related to the work ID and – when you pick from the floor location – to the license plate noted before. Check the inventory transactions and the on-hand quantity in the warehouse WH-## again. What is different now? Finally, post the packing slip for the sales order based on the mobile device transactions of the current exercise.

8.2

Transportation Management

The purpose of the transportation management in Dynamics 365 is to select external freight carriers for inbound and outbound shipments and to manage these

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inbound and outbound shipments. It is based on the advanced warehouse management, but it is also possible to use independently. Based on the load (e.g., a truckload), the origin address, and the destination address, you can run a calculation of the possible transportation routes with their costs. Then create a route based on the rate calculation (or enter it completely manually, independent of calculated rates). If required, you can subsequently record the agreement as transportation tender. The management of dock appointments for loading the truck and the reconciliation of the freight invoice with the route are further options in the transportation management.

Figure 8-19:

8.2.1

Overview of the transportation management functionality in Dynamics 365

Core Setup for Transportation Management

Before you can perform the processes in the transportation management, you have to complete the required setup.

8.2.1.1 Transportation Engines Transportation engines, which include rate engines and transit time engines, are calculation routines that compute the price and the time for transportation. Engines include a .NET assembly and work like plug-ins for the individual carrier contracts. While it is easy to integrate additional transportation engines, the standard application includes a few default engines. The engines are divided into following types:  Rate engines – Calculate the transportation rate.  Generic engines – Simple engines that compute the result (e.g., the distribution of costs for a load) on the basis of call parameters. They are used by other engines.  Mileage engines – Calculate the distance between origin and destination.  Transit time engines – Calculate the transportation time.

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 Zone engines – Calculate the zone of the origin and the number of zones between origin and destination.  Transit time engines – Calculate the transportation time.  Freight bill types – Used for automatic freight bill reconciliation. The engine forms include the required parameters of the particular engines. You can access them in the menu folder Transportation management> Setup> Engines, except for the freight bill types (Transportation management> Setup> Freight reconciliation> Freight bill type). Rate engines (Transportation management> Setup> Engines> Rate engine) are the core engines for the calculation of transportation costs. They can refer to sub-engines like the mileage engines. Rating metadata (Transportation management> Setup> Rating> Rating metadata) determine the lookup criteria for calculating the rates of a shipping carrier. These lookup criteria are fields which are relevant for the transport – for example, the postal code of the destination address. They are used as parameters for the different rate engines and have to match the internal requirements of the related rate engine. Basic metadata are generated when initializing the base engine data in the parameters.

Figure 8-20:

Entering distances in the mileage engine

Mileage engines (Transportation management> Setup> Engines> Mileage engine) determine the distance between the origin and the destination address, usually based on postal codes. You can enter the distance between the postal codes of the relevant origin and destination addresses on the tab Details of the mileage engines.

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The button Metadata provides access to the definition of available and mandatory fields for entering distances. If you add or change a field in the metadata, the related column is subsequently shown in the mileage engine. But be aware that the field selection has to match the requirements of the engine. Transit time engines (Transportation management> Setup> Engines> Transit time engine) determine the time that is required for the transport between addresses. The setup is similar to the mileage engine, except that you have to enter days (instead of miles in the mileage engine) and that the transit time is depending on the carrier service.

8.2.1.2 Transportation Methods and Shipping Carriers Transportation methods (Transportation management> Setup> Carriers> Transportation methods), which include categories like “Air” or “Ground”, and modes (Transportation management> Setup> Carriers> Mode), which include categories like “Truckload” or “Parcel”, differentiate the kinds of transport. They are a basis for the rate calculation in the parameters and engines. The transportation method is a required field in the shipping carrier service.

Figure 8-21:

Entering a carrier with his service

In order to enter an active carrier, open the menu item Transportation management> Setup> Carriers> Shipping carriers and insert the carrier with the sliders Activate

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shipping carrier and Activate carrier rating set to “Yes”. On the tab Services in the shipping carrier form, enter one or more transportation services that are provided by the carrier. When you insert a carrier service, a new Mode of delivery is created automatically in the line.

8.2.1.3 Break Masters, Rate Masters and Rating Profiles Within Dynamics 365, break masters, rate masters and rating profiles are the core setup for the calculation of carrier rates. Break masters (Transportation management> Setup> Rating> Break master) determine the steps (intervals) and the unit (e.g., miles) for the rate. If there is, for example, a different price for transports up to 100 miles and for longer distances, enter a break master with a step “100” and a step “9999” (or another maximum distance).

Figure 8-22:

Setting up a break master

Rate masters (Transportation management> Setup> Rating> Rate master) show the pricing structure of the particular carriers. When you create a rate master, select the Rating metadata ID (which determines the columns on the tab Rate base assignments) on the tab Overview. Then click the button Rate base and enter the rate bases for the rate master. Rate bases contain the pricing of the rate master. They use the steps (intervals) of the Break master that you select on the tab General in the rate base as columns on the tab Details, in which you can enter the respective prices. Once you have finished the setup of the rate base, open the tab Rate base assignment in the rate master and assign the rate bases of the rate master to addresses/regions. The selected Rating metadata ID in the rate master controls the columns (e.g., postal

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codes or zones) on this tab. The rate base assignment makes the rate master available for calculating the transportation price from/to the applicable addresses.

Figure 8-23:

Setting up a rate master

Figure 8-24:

Entering the rate base for the rate master

Rating profiles (Transportation management> Setup> Rating> Rating profile) link the shipping carrier with the Rate engine, the Rate master, and the Transit time engine.

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With this link, the rating profiles control which prices and transport times are applicable for the particular transports. If a carrier applies different rate masters for different services, there are multiple rating profiles for one carrier. As an alternative to the separate menu item, you can access the rating profiles of a carrier on the tab Rating profiles in the shipping carrier form.

8.2.1.4 Transportation Management Parameters The transportation management parameters (Transportation management> Setup> Transportation management parameters) contain basic settings for the transportation management module, including the number sequences in transportation management. The button Initialize base engine data in the toolbar of the tab General/ Engines in the parameters provides the option to initialize the engine setup data for the available base engines.

8.2.1.5 Settings in the Released Products In the released product detail form, the slider Use transportation management processes on the tab Transportation controls whether transportation management is used for the item. This slider is always set to “Yes”, if the item is subject to the advanced warehouse management (as specified by the storage dimension group). For items that use the basic warehouse management, the slider Use transportation management processes is set to “No” by default, but you can manually set it to “Yes”. In order to use the transportation management when processing a sales order without advanced warehouse management, create and confirm a shipment (without a wave) for a warehouse that is enabled for advanced warehouse management. In the load planning workbench, execute rating and routing as usual.

8.2.1.6 Check of the Rate Calculation You can check the rates for transportation, which are calculated with the current transportation setup, in the rate route workbench (Transportation management> Planning> Rate route workbench): Enter a From-address and a To-address on the tab Criteria and click the button Rate shop to view all available transports with the related price on the tab Route results. If you deselect the checkbox Hide Exceptions, transport options which are not available with the selected settings are also shown. For these transports, click the button View exception details to view details on the missing setup.

8.2.1.7 New in Dynamics 365 Compared to Dynamics AX 2012, there are changes in the terminology (“rating metadata” replace “rate base types”).

8.2.2

Managing Transportation Processes

Transportation management can be used in inbound and in outbound processes. Apart from sales orders, it covers purchase orders and transfer orders.

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8.2.2.1 Core Transportation Process The starting point for the transportation process is a sales order, purchase order, or transfer order with a product that is enabled for transportation management. The next step is planning the transport in the load planning workbench, which you can access in the menu item Transportation management> Planning> Load planning workbench or with the button WAREHOUSE/Loads/Load planning workbench in the sales order. In the load planning workbench, select the respective order line on the tab Sales lines and add it to a new load (click the button SUPPLY AND DEMAND/ Add/To new load in the action pane) or to an existing load. The load is subsequently shown in the lower pane of the load planning workbench.

Figure 8-25:

Adding a sales order line to a new load in the load planning workbench

If the slider Plan by shipment on the tab General/Shipment in the transportation management parameters is set to “Yes”, the additional tab Shipments is shown in the load planning workbench. In this case, you can add a sales order line to a load after it has been released to the warehouse (which creates the shipment). In order to calculate the rate and time for transportation, select the respective load on the tab Loads in the lower pane of the load planning workbench and open the

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rate route workbench with the button Rating and routing/Rate route workbench in the toolbar of this tab. In the rate route workbench, click the button Rate shop to calculate all available transport options with the particular prices (the button Rate only shows the least expensive transport). Once you have decided on the transport, select the respective line on the tab Route results and click the button Assign in the toolbar of this tab. Assigning creates a route and links this route (which you can view in the menu item Transportation Management> Planning> Routes) to the load.

Figure 8-26:

Selecting a route in the rate route workbench

If you want to create a route with a manual price (instead of calculating the price in the rate route workbench), click the button Rating and routing/Manual rating in the toolbar of the lower pane in the load planning workbench. In order to initiate warehouse picking, select the load on the tab Loads in the lower pane of the load planning workbench and create the shipment with the button Release/Release to warehouse in the toolbar of this tab. Once all warehouse processes are finished, and the items are received on the final shipping location, you can confirm the shipment and the load (see section 8.1.2). The confirmation tells the carrier that the load has been shipped. The load status changes to “Shipped” and by default, the load is not shown in the load planning workbench anymore.

8.2.2.2 Transportation Tenders A transportation tender is an agreement with a carrier on a particular transport. It includes the transportation date and the rate. In the shipping carrier form

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(Transportation management> Setup> Carriers> Shipping carriers), the field Transportation tenders on the tab Overview controls whether transportation tenders are updated manually or via EDI. In the transportation process, access the transportation tenders from the respective route in the route form (Transportation Management> Planning> Routes, button Transportation tenders), or from the load in the load form (Transportation Management> Planning> Loads> All loads, button TRANSPORTATION/Transportation tenders). In order to create a new tender, click the button New in the transportation tender form. You can update the status of the tender with the button Update status> Submit/ Confirm/Accept once it is submitted to the carrier, confirmed by the carrier, and accepted from your side. If you want to view all transportation tenders, open the menu item Transportation management> Planning> Transportation tenders.

8.2.2.3 Warehouse Appointments In order to ensure organized handling of the trucks at the dock, you can use warehouse appointments to schedule the date and time for loading the truck. As a prerequisite for warehouse appointments, you have to create appointment rules (Transportation management> Setup> Appointment scheduling> Appointment rules). An appointment rule represents a warehouse dock. In the transportation process, open the appointment scheduling form from the load planning workbench: Select the respective load on the tab Loads in the lower pane of the load planning workbench and click the button Transportation/Appointment scheduling in the toolbar of this tab. In the appointment scheduling form, create the appointment, select an Appointment rule, enter the start/end time and confirm the appointment with the button Update status/Firm. Current appointments are shown in the menu item Transportation management> Dock appointment scheduling> Appointment scheduling. When the truck arrives, register the driver check-in and check-out in the menu item Transportation management> Dock appointment scheduling> Driver check-in and check-out. Alternatively, you can register the check-in/check-out in the appointment scheduling form, or on a mobile device in the warehouse (in the applicable mobile device menu items).

8.2.2.4 Transportation Constraints Transportation constraints restrict available options for transportation – for example, to prevent that a particular carrier transports a particular item number. In order to set up transportation constraints, open the menu item Transportation management> Setup> Routing> Constraints and enter the disallowed combinations of items, shipments, and carriers. The field Constraint action controls whether to create a warning or an error.

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When routes are calculated in the rate route workbench, a constraint (disallowed combination) that is applicable to a particular transport generates an exception. The exceptions are shown in the column Constraints.

8.2.2.5 Segmented Transports Segmented transports apply if you want to change the carrier within transport. Hub masters represent the hubs where you can switch carrier for this purpose. As a prerequisite for segmented transports, the following setup is required:  Hub types (Transportation management> Setup> Routing> Hub types) – Different types of hubs (e.g., harbors, airports).  Hub masters (Transportation management> Setup> Routing> Hub masters) – Places with an address (e.g., different harbors), on which you can switch carriers.  Route plans (Transportation management> Setup> Routing> Route plans) – Sequence of transports from the origin to the first destination hub, from the first hub to the next hub, and between all following hubs. The rate per segment is the result of the regular rate calculation based on the hub addresses, or, if applicable, a spot rate that you enter for the segment (click the button Spot rates on the tab Details).  Route guide (Transportation management> Setup> Routing> Route guides) – With Origin and Destination address selection. Enter the route plan on the tab Result. In order to calculate rates with segmented transports, click the button Route with rate in the rate route workbench. If you want to view the transport segments with the rate, select the route on the tab Route results and switch to the tab Segments.

8.2.2.6 Hub Consolidation If you want to use a common transport for loads that are shipped from different addresses, you can consolidate loads. As a prerequisite for hub consolidation, the slider In transit planning on the tab General in the transportation management parameters has to be set to “Yes”. The places, where loads can be consolidated, have to be set up as hubs. In the transportation process, generate the initial loads for the transport from the shipping warehouses. In the load planning workbench, select the respective loads one by one on the tab Loads in the lower pane and override the destination with the button Transportation/Hub consolidation in the toolbar of this tab. Hub consolidation generates records on the tab Transportation request lines in the load planning workbench, which you can add to a new load (in the same way as for sales lines). In the next step, create a route for this additional load in the rate route workbench (in the same way as for sales lines).

8.2.2.7 Freight Discounts Rate engines calculate the base rate for transportation as described above. With freight discounts (Transportation management> Setup> Rating> Discounts), you can

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adjust this base rate. Freight discounts available in both directions, for the rate paid to the carrier (Discount type “Shipper”), and for the rate charged to the customer (Discount type “Customer”). When you set up a freight discount, select the Discount type and the start/end date (on the tab Dates). Additional fields in the discount form enable restrictions for the discount which serve as a filter – for example, if you need to enter a discount for a particular Shipper carrier. In order to enter the discount value, access the tab Discount, select the Result type (“Percentage” or “Amount”) and enter the percentage or rate. Positive discounts reduce the freight rate, and negative discounts increase the rate. When calculating a rate in the rate route workbench, the amounts in the columns Customer rate and Shipper rate deduct the discount from the base rate (Total rate).

8.2.2.8 Charging Freight to the Customer If you want to charge a freight rate to the customer, which is different from the actual base rate calculated by the rate engine, there are the following options:  Freight discount – For the Discount type “Customer” (as described before).  Override charges – Customer rate independent of the actual transport. With override charges (Transportation management> Setup> Rating> Override charges), you can enter a fixed price, or apply the charges of a fixed carrier irrespectively of the selected route. For a fixed price, set the slider Manual on the tab Charge of the override charge form to “Yes” and enter the price on the tab Charge manual rates which is shown then. If you want to apply the charges of a fixed carrier, irrespectively of the actual carrier (e.g., if the customer pays only truck charges), select the Shipping carrier on the tab Charge. When you calculate the freight rate for the customer in the rate route workbench, the Customer rate shows the rate as specified in the override charges. Optionally you can include transportation costs in the sales order. For this purpose, the following setup is required:  Charges code (Accounts receivable> Charges setup> Charges code) – Set up a charges code with the posting type combination Customer – Ledger (for adding the charges to the order total) or Ledger – Ledger (for internal posting).  Charges assignment (Transportation management> Setup> Rating> Miscellaneous charges) – Create a miscellaneous charges assignment with the Miscellaneous charge type “None” which links the miscellaneous charges code in accounts receivable with freight charges in transportation management.  Delivery terms (Sales and marketing> Setup> Distribution> Terms of delivery) – With the slider Add transportation charges to orders set to “Yes”. In order to generate the charges in a sales order, enter the order, create the load, calculate the rate, and create/assign the route. Then create the shipment (“Release to warehouse”) and execute the warehouse processes. When you confirm the shipment, the freight charges are added as miscellaneous charges to the order line.

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8.2.2.9 Freight Invoice Matching When you receive a freight invoice from a carrier, you can enter or import it and match it with the route to which the invoice refers. As a prerequisite for freight invoice matching, the following setup is required:  Bill types (Transportation management> Setup> Freight reconciliation> Freight bill type) – Required to link freight invoice processing to the transportation engine, define the parameters that control the mandatory fields for finding a match.  Bill type assignments (Transportation management> Setup> Freight reconciliation> Freight bill type assignments) – Assign bill types to carriers and transportation modes.  Reconciliation reasons (Transportation management> Setup> Freight reconciliation> Reconciliation reasons) – Are used when there is no exact match to a freight bill. For the deviation, they categorize reasons and specify the ledger posting.  Audit masters (Transportation management> Setup> Freight reconciliation> Audit master) – For automatic freight reconciliation (optional for manual reconciliation) contain tolerances and reconciliation results.  Billing groups (Transportation management> Setup> Freight reconciliation> Billing groups) – Group carrier services for billing purposes. Select the respective Billing group ID per service in the shipping carrier form.  Transportation management parameters – Tab General/Vendor invoice. In the transportation process, freight invoice matching is based on routes which have been completed (the shipment/load is confirmed). If you want to manually register the freight invoice that you receive from the carrier, open the load planning workbench, deselect the checkbox Hide shipped and received in the load filter on the tab Loads in the lower pane, and select the respective load. Then click the button Related information/Freight bill details in the toolbar of this tab to access the Freight bill details form. In this form, select the applicable freight bill in the list pane on the left before you click the button Generate freight bill invoice and enter the invoice number in the subsequent dialog. An alternative way to record a freight bill is to open the freight invoice details form (Transportation management> Inquiries and reports> Freight invoice details) and to enter the invoice with all header and line details manually. In order to match and to approve the freight invoice subsequently, click the button Match freight bills and invoices in the freight invoice detail form. In the form Freight bill and invoice matching that is shown next, switch to the tab Unmatched freight bill details, select the respective freight bill, and click the button Match in the toolbar of this tab. If the freight invoice that you have entered matches the details of the route, click the button Submit for approval in the action pane first, and then the button Submit for approval. After approval, you can click the button Vendor invoice journals in the freight invoice details form to access the invoice journal that has been created for the freight invoice.

9

Financial Management

The primary responsibility of finance and accounting is to control and to analyze all transactions that change the financial value in any area of the enterprise. These transactions are generated in business processes all over the organization. Finance management is the core area of business management solutions. In Dynamics 365, there is a deep integration of finance with all business processes. As a result, accurate financial figures are immediately available all the time.

9.1

Business Processes in Finance

Before we start to go into details, the lines below give an overview of the business processes in finance.

9.1.1

Basic Approach

The core task of finance and accounting is to manage the general ledger with its accounts, which are the basis for the balance sheet and the income statement (profit and loss statement). In addition to the general ledger, accounting keeps subledgers, for example the accounts receivable, accounts payables, fixed assets, projects, and inventory. These subledgers contain detailed data for the respective area of the general ledger. Inventory management, for example, includes inventory transactions which reflect the details of changes for the stock accounts. Whenever you post a transaction in a subledger that has got a financial impact – for example, an invoice in sales, or a counting difference in inventory – there is a transaction in the general ledger. If you post a sales order invoice that includes a stocked item, there are transactions in, at least, the following ledgers:  Inventory – Financial value (in the transaction and the on-hand quantity).  Accounts receivable – Customer debt (customer transaction).  General ledger – Stock account, revenue account, COGS account (cost of goods sold), customer summary account. The ledger integration is one of the core characteristics of Dynamics 365. It provides traceability of all financial vouchers back to the origin in other modules. Depending on settings for subledger batch transfer, subledger transactions are immediately posted to the general ledger. For processing transactions in Dynamics 365, the voucher principle applies: In all areas of the application, you have to register a voucher before you can post it. After posting, it is not possible to modify a voucher anymore. If you want to cancel a transaction, you have to post a reversing transaction. © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_9

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At a Glance: Ledger Journal Transactions

In order to record a manual ledger transaction in Dynamics 365, you have to use a journal. The lines below show how to post a single-line transaction. In the general journal list page (General ledger> Journal entries> General journals), which shows all open journals that are not posted yet, click the button New to create a new journal header. Alternatively, you can open the workspace General journal processing and create a journal header with the tile New journal. Select a journal name for the new journal in the column Name of the journal list page next and optionally enter a text that explains the transaction in the column Description. If the transaction is subject to sales tax or VAT, the slider Amounts include sales tax on the tab Setup of the journal header controls whether the debit (or credit) amount in the journal lines includes tax. In order to switch to the journal lines, click on the Journal batch number shown as a link in the grid of the journal list page, or click the button Lines in the action pane. In a transaction that does not refer to subledgers, leave the default option “Ledger” in the column Account type of the journal lines and select the account number with the financial dimensions in the column Account (using segmented entry control). If you want to post to a subledger, select the respective Account type instead of the type “Ledger” and enter the related account number – for example, the vendor number in the column Account with the Account type “Vendor”.

Figure 9-1:

Registering a journal line in a general journal

In a single-line transaction, you can enter the account and the offset account (including applicable financial dimensions) in the one common journal line. Once you have completed the line, post the journal with the button Post in the action pane of the journal header or lines.

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Core Setup for Finance

Since settings in finance are a core prerequisite for the whole application, you have to complete the basic financial configuration before you can set up other modules and before you can post a transaction in any part of the application. The basic configuration in finance includes the following items:  Fiscal and ledger calendars – Specify the financial periods.  Currencies and exchange rates – Specify the monetary units.  Charts of accounts – Specify the ledger accounts. Charts of accounts, fiscal calendars, and currencies/exchange rates are shared across companies. The ledger form determines the accounting currency, the chart of accounts, and the calendar that is used in the current company. If you want to manage a separate chart of accounts or calendar per company, assign it accordingly in the ledger form of each company.

9.2.1

Fiscal and Ledger Calendars

The primary purpose of fiscal calendars is to determine the fiscal year. Within a fiscal year, the financial periods are specified with the start date and end date. The ledger calendar, which is based on a fiscal calendar, controls at the company level which financial periods are open for transactions.

9.2.1.1 Fiscal Calendars Fiscal calendars are shared across all companies within a common Dynamics 365 database. The field Fiscal calendar in the ledger form (General ledger> Ledger setup> Ledger) then determines the applicable fiscal calendar for the current company. You have to select it during the initial company setup. Within the fiscal years of a fiscal calendar, there are the accounting periods with start date and end date. The length of the individual accounting periods depends on the reporting requirements of the company. In order to edit the fiscal calendars, open the menu item General ledger> Calendars> Fiscal calendars. If you want to create a new fiscal calendar, click the button New calendar and enter the calendar ID and applicable settings for the first fiscal year (start date, end date, name, period length, and unit – be sure to select the unit “Months” in case of monthly periods) in the drop-down dialog. If you want to add a fiscal year to a fiscal calendar, select the particular calendar in the lookup field Calendar at the top of the list pane on the left before you click the button New year in the action pane. In the related drop-down dialog, select to copy the settings from the last year (set the slider Copy from last fiscal year to “Yes”), or enable a manual update of the end date, period length, and unit for the new year. Then click the button Create to create the new year with its accounting periods.

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9.2.1.2 Opening Periods and Closing Periods Apart from regular operating periods (with the Type “Operating”), there are two period types which are not available for regular transactions: Closing periods and Opening periods. If required, you can attach multiple closing periods to each operating period. Closing periods contain period-end or year-end transactions. You can only register and post these transactions in a closing sheet (General ledger> Period close> Closing period adjustments) in the course of period closing. Opening periods contain the opening transactions for a fiscal year. Once the previous year is closed, you can create the opening transactions in the menu item General ledger> Period close> Year end close based on the closing transactions.

9.2.1.3 Ledger Calendars As a prerequisite for posting a transaction in Dynamics 365, the posting date of the transaction has to be included in a ledger period with the period status “Open”. The required period status is controlled at the company level in the ledger calendar, not in the shared fiscal calendar.

Figure 9-2:

Managing the period status in the ledger calendar

The ledger calendar (General ledger> Calendars> Ledger calendars) contains the periods of the fiscal calendar assigned to the current company (selected in the ledger form). For the fiscal year and the period that is selected in the list pane on the left of the ledger calendar form, the tab Legal entities on the right shows all assigned companies with their period status. You can open or close periods for individual companies (select the respective option in the column Period status) or in common (select the applicable companies and click the button Update period status).

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If the period status is “Open”, you can post transactions in that period. The period status “On hold” blocks posting. The status “Permanently closed” also blocks posting, but whereas it is possible to reopen periods that are on hold, this is not possible for permanently closed periods. For this reason, close a period permanently only when it is definitely closed in accounting (after reporting to the authorities). With the button Update module access and the related columns, you can set a module-specific blocking of transactions and exclude user groups from blocking. In order to support period closing, the workspace Financial period close shows a list of tasks. You can set up these tasks in the menu item General ledger> Period close> Financial period close configuration.

9.2.1.4 New in Dynamics 365 Compared to Dynamics AX 2012, items which are new in the financial calendar administration include the period close workspace, the access to ledger calendars, and the option to close periods in multiple companies in parallel.

9.2.2

Currencies and Exchange Rates

All financial transactions – general ledger transactions and subledger transactions (e.g., inventory or customer transactions) – refer to currencies. A transaction is always recorded in the accounting currency of the company, and, if applicable, additionally in a foreign currency. For this reason, the setup of currencies is a prerequisite for posting any transaction in Dynamics 365.

9.2.2.1 Currencies In order to facilitate the currency management in multi-company organizations, the currency table is shared across all companies within a common Dynamics 365 database. For the currency that is selected in the list pane on the left of the currency form (General ledger> Currencies> Currencies), the tabs on the right show the related settings for this currency. This includes the definition of the rounding precision on the tab Rounding rules.

9.2.2.2 Exchange Rates Exchange rate types (General ledger> Currencies> Exchange rate types) enable multiple parallel exchange rates between two currencies. You have to set up, for example, two different exchange rate types if you want to use different rates for budget entries and for current transactions. In order to access the Currency exchange rates form, click the button Exchange rates in the Exchange rate types form, or open the menu item General ledger> Currencies> Currency exchange rates. For the Exchange rate type selected at the top of the list pane in the currency exchange rate form (see Figure 9-3), the related currency relations are shown below. If you need an additional relation (e.g., for a currency which has

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not been used before), click the button New in the action pane and enter the details in the upper area of the right pane. The Conversion factor specifies the applicable factor for exchange rate calculation. The tab Add or remove exchange rates on the right shows the exchange rates for the currency relation that is selected in the list pane on the left. The filter From date and To date determines the date range for which valid exchange rates are displayed. In order to enter an exchange rate for a new date, click the button Add in the toolbar of the tab. The column Exchange value shows the conversion result – you can check whether you have entered the exchange rate in the right way. In daily business, enter or import new exchange rates continuously (usually at least once a month) in order to use a correct conversion in foreign currency transactions.

Figure 9-3:

Managing exchange rates in the currency exchange rate form

Currency exchange rates and exchange rate types are shared across all companies. If you need to keep separate exchange rates per company, select a different exchange rate type for each company in the ledger form.

9.2.2.3 Currency Settings in the Ledger Form The Accounting currency on the tab Currency in the ledger form (General ledger> Ledger setup> Ledger) determines the local currency of the current company. This currency is used in all financial transactions. It is not possible to change the accounting currency of a company once transactions are registered. If you need to change the local currency later (e.g., if your country implements a new currency), you have to use specific conversion tools. The Exchange rate type on the tab Currency in the ledger form determines the default exchange rate type for regular transactions. In addition, there is a separate default exchange rate type for budget transactions.

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The main accounts for exchange rate gains and losses in the current company are specified on the tab Accounts for currency revaluation in the ledger form.

9.2.3

Financial Dimensions

In addition to the main accounts that are specified in the chart of accounts, financial dimensions (like cost center or department) are further levels in the structure of financial transactions. The financial dimensions that you have to enter in the individual transactions depend on the account structures that are assigned to the current company. Financial reporting is not only possible at the company level, but also at the level of financial dimensions. This is, apart from other possible reporting requirements, also important in conjunction with the multisite functionality: If you assign a financial dimension to the inventory dimension “Site” (see section 10.1.6), you can report the income statement per subsidiary within a legal entity.

9.2.3.1 Setup of Financial Dimensions In Dynamics 365, financial dimensions and dimension values are shared across all companies within a common Dynamics 365 database. Financial dimensions are not limited to standard dimensions like department, cost center and purpose. You can easily set up as many financial dimensions as required. But with regard to transparency, the probability of wrong entries, and the effort for registration, you should not set up more dimensions than effectively required. If you want to set up a new financial dimension, open the menu item General ledger> Chart of accounts> Dimensions> Financial dimensions and click the button New. Then select the origin of the related financial dimension values in the lookup field Use values from:  – Create a dimension without reference to other tables.  One of the other options – Link the dimension to other entities in the application (e.g., customers, item groups, or cost centers). If you select, for example, the option “Departments” in the field Use values from, the financial dimension is linked to operating units with the type “Department”. In this case, all departments that are entered in the organization management (Organization administration> Organizations> Operating units) are synchronously available as financial dimension values for this dimension. If you select the option “” in the lookup field Use values from, you must enter the financial dimension values manually. Once you have created a new dimension, a system administrator (or a user with appropriate privileges) has to click the button Activate in the dimension form to activate the dimension.

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9.2.3.2 Financial Dimension Values You can access the dimension values of a financial dimension with the button Financial dimension values in the financial dimension form. For custom dimensions, you have to create the Dimension values manually. For other financial dimensions, you can edit the dimension value details, but you cannot create records (since the dimension values derive from other areas). For the dimension value that is selected in the list pane on the left, the related dimension value details are shown on the right. The tab General on the right contains shared settings that apply to all companies which use the dimension. If you want to block future transactions that refer to the selected dimension value, set the slider Suspended to “Yes” or enter applicable dates in the field Active from or Active to. On the tab Legal entity overrides, you can enter further blocking at the company level.

Figure 9-4:

Managing dimension values for a financial dimension

9.2.3.3 Using Financial Dimensions A financial dimension has to be included in the account structures or the advanced rule structures which are assigned to the current company before you can use it in transactions and inquiries. Settings in the applicable account structure or advanced rule structure also determine, if and which dimension value is optional/required when posting to a particular account. In master data forms (e.g., in the customer form or the released product form), the tab Financial dimensions shows all financial dimensions that are included in the account structures and advanced rule structures of the current company. Dimension values, which you enter on this tab, are used as default dimension values when registering an order or a journal line.

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In the ledger journal lines and in all other forms with a ledger account field, financial dimensions are not shown as separate fields. Using segmented entry control (see section 9.3.1), the financial dimensions are to be entered together with the main account in one – segmented – field.

9.2.3.4 Balancing Financial Dimension and Interunit Accounting Interunit accounting, an optional feature in Dynamics 365, ensures a balanced balance sheet for a selected financial dimension – the balancing dimension. Following settings are required for the use of interunit accounting:  Accounts for automatic transactions – Enter appropriate main accounts for the Posting type “Interunit-debit” and “Interunit-credit” in the accounts for automatic transactions (see section 9.2.4).  Balancing financial dimension – Selected in the ledger form. If a dimension is selected in the field Balancing financial dimension in the ledger form, you have to enter a dimension value for this dimension in each transaction. If the from-value for the balancing dimension in a transaction is different from the tovalue, Dynamics 365 posts additional balancing transactions to the main accounts “Interunit-debit” and “Interunit-credit”. These balancing transactions are posted together with a ledger transaction from one department to another, if departments are the balancing dimension.

9.2.3.5 New in Dynamics 365 Compared to Dynamics AX 2012, the activation of dimensions is new.

9.2.4

Account Structures and Chart of Accounts

Account structures, charts of accounts, and main accounts determine the core structure in finance. They are shared across companies in Dynamics 365. In a company, the chart of accounts that is selected in the ledger form determines the applicable main accounts. The applicable financial dimensions are controlled by the assigned account structures.

9.2.4.1 Ledger Account and Main Account The ledger account field in a financial transaction includes the main account and the applicable financial dimensions. The account structure, which is assigned at the level of company and main account, controls the financial dimensions which are included in the ledger account.

9.2.4.2 Charts of Accounts Depending on the structure of your organization and the number of legal entities, you have to set up one common or multiple independent charts of accounts. The chart of account form (General ledger> Chart of Accounts> Accounts> Chart of Accounts) shows all available charts of accounts in the list pane on the left. For the chart of accounts that is selected on the left, the main accounts are shown on the

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right. If you expand the Related information pane with the FactBoxes, you can view the ledgers and legal entities which use the selected chart of accounts in the FactBox Ledgers.

Figure 9-5:

Editing a chart of accounts

If you want to create a completely new chart of accounts, click the button New in the action pane. In the toolbar of the tab Main accounts, click the button New or Edit if you want to open the main account form. In the main account form, you can insert or modify the main accounts of the selected chart of accounts.

9.2.4.3 Settings in the Ledger Form Settings in the ledger form (General ledger> Ledger setup> Ledger) determine the chart of accounts and the account structures which are assigned to the current company. These settings are required before you can register any transaction. You can use one common chart of accounts in multiple companies – select the same Chart of accounts in the respective field of the ledger form in all applicable companies. Once the first transaction has been posted in a company, it is not possible to change the chart of accounts assignment anymore. The tab Account structures in the ledger form contains the account structures that are assigned to the current company. In order to add an account structure, click the button Add in the toolbar of this tab. Since the account structures determine the available financial dimensions when posting to a ledger main account, each main account which is included in the chart of accounts has to be uniquely assigned to one account structure without overlapping or missing assignments. If you use interunit accounting, select the balancing financial dimension of the company in the ledger form. If selected, this dimension has to be included in all account structures of the company.

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9.2.4.4 Account Structures The page General ledger> Chart of Accounts> Structures> Configure account structures shows all account structures of the enterprise. If you want to access the details of an account structure, click on the respective field Name shown as a link in the grid. Alternatively, open the account structure detail form from the ledger form (button Configure account structures in the toolbar of the tab Account structures). If you want to create a completely new segment combination that consists of the main account and financial dimensions, create a new account structure with the button New in the account structure list page. In the drop-down dialog that is shown next, the slider Add main account usually remains set to “Yes” in order to include the main account as the first segment. You can set this slider to “No” if you want to use a financial dimension, and not the main account, as the first segment – for example, if your organization has got divisions and you want to apply the division as the first segment in transactions. Once you click the button Create in the dialog, the account structure detail form with the new account structure is shown.

Figure 9-6:

Configuring an account structure in the detail form

When you create a new or edit an existing account structure, it has got the status “Draft”. In order to add dimensions to the account structure, click the button Add segment in the toolbar of the upper pane in the detail form. Then select a segment field in the Add segment dialog. Once you close the dialog with the new segment, the related column is shown in the upper pane of the detail form. Then you can enter a filter in the new segment field (or, after selecting the field, on the tab Allowed value details). If you select the checkbox Blank values are allowed for a segment, the dimension is optional, and you are not required to select a dimension

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value when entering a transaction for a ledger main account which is covered by the account structure. The example in Figure 9-6 shows an account structure for the main accounts “100000” to “399999”, which contains the financial dimensions “BusinessUnit” and “Department” and does not restrict the available dimension values for the dimension “BusinessUnit”. If applicable to the account structure, you can add one or more lines for a segment – including the segment with the main account – with appropriate filters which prevent overlapping definitions. In this way, you can specify multiple allowed dimension value combinations. Once you have finished the setup of an account structure, click the button Activate to make the account structure available. If you want to edit an account structure later, click the button Edit in the action pane. The account structure status then switched to “Draft”. In this status, you can also delete an account structure.

9.2.4.5 Advanced Rule Structures Advanced rules and rule structures are an optional setup that you can use to apply an additional financial dimension only for transactions on one or a few particular accounts. An example is the use of the financial dimension “Campaigns” in combination with a particular marketing account in order to track campaigns. If you want to set up a new advanced rule structure, open the menu item General ledger> Chart of Accounts> Structures> Advanced rule structures and click the button New in the action pane. Then enter the applicable financial dimension(s) in a similar way to the setup of an account structure (described above). In order to apply the advanced rule structure, an advanced rule has to be created. Open the account structure form (General ledger> Chart of Accounts> Structures> Configure account structures) for this purpose, select the respective account structure (if the account structure has got the status “Active”, click the button Edit to switch to the status “Draft”), and click the button Advanced rules. In the Advanced rules form, click the button New and enter the ID and name for the new advanced rule in the drop-down dialog. In order to specify the main accounts which are assigned to the advanced rule, click the button Add new criteria on the tab Advanced rule criteria of the advanced rule form. Then click the button Add on the tab Advanced rule structures to assign an advanced rule structure to the advanced rule. Activating the account structure, to which the advanced rule is assigned, activates the advanced rule in parallel.

9.2.4.6 Main Accounts The structure and the format of the main accounts in the chart of accounts only depend on the internal requirements of your company. In order to comply with the different reporting structures for the balance sheet, the income statement, and

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other reports in finance, there are the financial reports (General ledger> Inquiries and reports> Financial reports) which you can set up with a structure which is separate from the structure of the chart of account. If you want to edit the main accounts, open the menu item General ledger> Chart of accounts> Accounts> Main accounts and click the button Edit. Alternatively, you can access the main accounts from the chart of account form (button Edit in the toolbar of the tab Main accounts). The main account form shows the chart of accounts that are assigned to the current company. The name of this chart of accounts is shown in the header of the right pane. In case this chart of accounts is assigned to multiple companies, you have to keep in mind that changes on main accounts also affect the other companies.

Figure 9-7:

Editing a ledger main account

If you want to enter a new account, click the button New in the action pane and enter a unique Main account number, a Name, and a Main account type. If you want to enter a translation of the account name, click the button Name Translations in the action pane.

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In the structure of the main accounts, you have to distinguish between transaction accounts and auxiliary accounts. The core difference between transaction accounts and auxiliary accounts is that you can only use a transaction account in a financial transaction. Auxiliary accounts support a clear structure of the chart of accounts, but they are not necessarily required. The Main account type, a lookup field in the main account form, divides the accounts into transaction accounts and auxiliary accounts as shown in Table 9-1 below. Table 9-1:

Structure of main accounts

Type Transaction accounts

Auxiliary accounts

Main account type in Dynamics 365 Balance accounts

   

Profit and loss accounts

 Profit and loss  Expense  Revenue

Balance sheet Asset Liability Equity

 Reporting (options for the Reporting type are “Header”, “Empty header”, and “Page header”)  Total  Common (required in China)

Transaction accounts include balance accounts, and profit and loss accounts. In Dynamics 365, these two account types work differently when closing a fiscal year: Whereas the balance of profit and loss accounts is zero in the opening transactions of the next year, balance accounts keep the balance. Within the balance accounts, you can optionally divide asset accounts and liability accounts. These subcategories are only used for filtering and sorting purposes. The same way you can subcategorize balance accounts, you can split profit and loss accounts into expense accounts and revenue accounts. In addition to the main account type, the lookup field Main account category on the tab General of the main account form provides another classification of main accounts. Main account categories (General ledger> Chart of accounts> Accounts> Main accounts categories) can be used as a basis for financial reports. When setting up a ledger main account which receives transactions from other modules (e.g., a summary account for vendor liabilities), select the checkbox Do not allow manual entry to block manual transactions on this account. On the tabs General, Posting validation, and Financial reporting of the main account form, you can specify default values and restrictions for the transactions. On the

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tab Legal entity overrides, you can block a ledger main account or enter default values for financial dimensions at the company level.

9.2.4.7 Trial Balance If you want to view the balances of the ledger main accounts, open the trial balance form (General ledger> Inquiries and reports> Trial balance). The tab Parameters in the trial balance form contains the setting for the period that is used for calculating the account balances. In order to perform the calculation, click the button Calculate balances on this tab. In order to view the transactions of an account, select the respective main account in the trial balance and click the button All transactions. The transaction form contains the following buttons which provide access to further details:  Voucher – Shows all general ledger transactions that are posted with the selected voucher.  Transaction origin – Shows the related transactions in all modules.  Original document – Provides the option to reprint the document.

9.2.4.8 Accounts for Automatic Transactions Settings in the Accounts for automatic transactions apply to ledger transactions, which are posted automatically and for which there is no other setting (e.g., for invoice discounts). If you want to enter a new account for automatic transactions, open the menu item General ledger> Posting setup> Accounts for automatic transactions and insert a record with the posting type and the assigned main account. You can generate a basic set of posting types, for which you enter the default accounts, with the button Create default types. Core settings in the accounts for automatic transactions include:        

Error account – Used in case of missing account settings. Penny difference in accounting currency – For small payment differences. Year-end result – Account for profit/loss when closing the fiscal year. Sales tax rounding Order invoice rounding – Sales invoice rounding. Purchase invoice rounding-off – Purchase invoice rounding. Vendor invoice discount – Main account for purchase order total discounts. Customer invoice discount – Main account for sales order total discounts.

If the slider Interrupt in case or error account in the general ledger parameters is set to “Yes”, Dynamics 365 displays an error message instead of posting to the error account in case there is a transaction for which no main account is specified in the integration settings.

9.2.4.9 Default Descriptions Default descriptions (General ledger> Journal setup> Default descriptions) determine a default text in transactions which are posted automatically (based on the ledger

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integration). If you want to enter a new default description, select the transaction type in the field Description first. Then enter the Language (“user” for a generic description) and the Text. The Text may include variables – available variables are shown at the bottom of the right pane.

9.2.4.10 New in Dynamics 365 Compared to Dynamics AX 2012, items which are new in the main account management refer to the browser-based user interface – for example, the main account form that does not show balances (use the trial balance) and the financial reports for financial statements (integrating reports from the Management Reporter).

9.2.5

Customers, Vendors, and Bank Accounts

When entering a ledger journal line, you can – apart from a ledger account – select a customer, a vendor, a project, a bank account, or a fixed asset in the account and the offset account field.

9.2.5.1 Bank Accounts Before you can select a particular bank account in a transaction, you have to set it up in the menu item Cash and bank management> Bank accounts> Bank accounts. In order to create a new bank account, click the button New and enter the bank account ID, the Routing number (identifies the bank), the Bank account number (as specified by the bank), and a Name for the bank account. The field Main account, in which you have to select the main account that is assigned to the particular bank account, is another important setting on the tab General of the bank account form. The field Currency specifies the currency of the bank account. If you want to enable transactions in multiple currencies, set the slider Allow transactions in additional currencies to “Yes”. The tab Additional identification contains the fields for SWIFT/BIC and IBAN. If your company has got multiple bank accounts at a particular bank, you can create a bank group (Cash and bank management> Setup> Bank groups) with general bank data like routing number, address, and contact information. If you select a bank group in the related field on the tab General of the bank accounts, the bank account is initialized with these data.

9.2.5.2 Vendors In order to manage vendor records, open the list page Accounts payable> Vendors> All vendors (see section 3.2.1). If you want to view vendor transactions (invoices and payments), select a vendor and click the button VENDOR/Transactions/Transactions in the action pane of this form. Apart from the invoice or payment amount in the column Amount, the column Balance in the vendor transaction form shows the open, not yet settled amount.

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9.2.5.3 Settlement of Vendor Transactions If you want to apply a posted payment to an invoice, click the button INVOICE/ Settle/Settle transactions in the vendor form to access the open vendor transactions. In the Settle transactions dialog, select the checkbox Mark in the transaction lines which you want to clear. You can settle one or more invoices with one or more payments or credit notes. If there are transactions in foreign currencies, you can specify the settlement date (for calculating exchange rate gains or losses) in the field group Settlement posting date at the top of the dialog. The field group Date used for calculating discounts determines the date for cash discount calculation. It includes the following options:  Transaction date – Select the transaction line that contains the date for discount calculation and click the button Mark as primary payment in the toolbar.  Selected date – Enter the discount calculation date in the date field on the right. Before you post the settlement with the button Post in the dialog, you can check the balance of the marked transactions on the tab Totals at the bottom of the dialog. If you do not want to post the settlements as a separate step, you can register the settlement already when entering a payment (see section 9.3.3). In case you have to cancel a posted settlement, open the closed transaction form with the button INVOICE/Settle/Undo settlement in the vendor form. In the closed transaction form, you can reverse settlements.

9.2.5.4 Customers You can find details on customer records (Accounts receivable> Customers> All Customers) in section 4.2.1 of this book. The way to execute transaction inquiries and to settle transactions (on the action pane tab COLLECT) for customers is similar to the procedures in vendor management.

9.2.6

Sales Tax / VAT Settings

The sales tax/VAT functionality supports various tax regulations, including the sales tax in the United States and the value added tax in Europe. Sales tax codes, which determine the tax rate, are the basis for sales tax calculation. In an invoice line, the applicable sales tax code is depending on both, the item sales tax group of the item and the sales tax group of the customer or vendor.

9.2.6.1 Sales Tax Parameters A primary setting for the tax calculation is whether sales tax is used: If your company is subject to the sales tax taxation, set the slider Apply sales tax taxation rules on the tab Sales tax/General of the general ledger parameters (Tax> Setup> Parameters> General ledger parameters) to “Yes”. Further general ledger parameters for sales tax include a default Item sales tax group or the setting whether cash discounts reduce sales tax.

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9.2.6.2 Sales Tax Authorities In the setup of sales tax calculation, enter the authorities (Tax> Indirect taxes> Sales tax> Sales tax authorities) with ID, Name, and Report layout for tax reporting first.

9.2.6.3 Sales Tax Settlement Periods Applicable periods for tax reporting (usually monthly periods) are specified in the menu item Tax> Indirect taxes> Sales tax> Sales tax settlement periods. When you create a settlement period definition with ID and description, assign the applicable Authority and enter the period length (Period interval unit and Period interval duration) on the tab General. Then switch to the tab Period intervals and click the button Add in the toolbar to enter the first period manually (e.g., Jan 1 – Jan 31). In order to create further periods, you can click the button New period interval in the toolbar of this tab.

9.2.6.4 Ledger Posting Groups Sales tax ledger posting groups control the main accounts for sales tax transactions (depending on the sales tax code of the invoice transaction). In order to create a sales tax ledger posting group, open the menu item Sales tax> Setup> Sales tax> Ledger posting groups and click the button New. Enter the group ID and description before you select the main account for the Sales tax payable (tax for purchasing), or for the Sales tax receivable (tax for sales), or for the Use tax expense and the Use tax payable as applicable. The Settlement account specifies the balance account for the amount to be paid to the authorities.

9.2.6.5 Sales Tax Codes Sales tax codes (Tax> Indirect taxes> Sales tax> Sales tax codes) control the tax rate and the calculation basis. On the tab General in the sales tax code form, assign the Settlement period and the Ledger posting group. Detailed calculation parameters are available on the tab Calculation. In order to specify the tax rate, click the button SALES TAX CODE/Sales tax code/Values in the action pane and enter the applicable rate in the column Value of the Sales tax code values form. Once you have created a sales tax code, assign it to applicable sales tax groups and item sales tax groups. Dynamics 365 determines the sales tax code of an invoice line from the sales tax code, which is included in the settings of both – the item sales tax group of the item, and the sales tax group of the customer or vendor. In order to apply, for example, a tax code “AV_CAST” to a sales invoice line, the line has to comply with both of the following conditions:  Item sales tax group – The item sales tax group of the item contains the sales tax code “AV_CAST”.  Sales tax group – The sales tax group of the customer contains the sales tax code “AV_CAST”.

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Figure 9-8:

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Managing the sales tax codes

9.2.6.6 Sales Tax Groups and Item Sales Tax Groups If you want to set up a new sales tax group, open the menu item Tax> Indirect taxes> Sales tax> Sales tax groups and click the button New. Enter the ID and the description on the tab Overview before you switch to the tab Setup. On this tab, you have to insert all applicable sales tax codes for the customers or vendors with this group. In order to assign the sales tax group to a customer or vendor, open the customer or vendor form and select the Sales tax group on the tab Invoice and delivery in the detail form (usually when creating a customer or vendor). Default values for the sales tax group are specified in the customer group or the vendor group. The menu item Tax> Indirect taxes> Sales tax> Item sales tax groups provides access to the items sales tax groups, which apply to the released products. Setting up an item sales tax groups works similar to setting up a sales tax group. In order to assign item sales tax groups to an item, open the released product form and select the Item sales tax group for sales (on the tab Sell) and for purchasing (on the tab Purchase) in the detail form. Default values for the item sales tax groups are specified on the tab Setup in the item group form. If you are using product categories in order lines, assign item sales tax groups to categories in the procurement category form and in the sales category form.

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Figure 9-9:

Managing the item sales tax groups

9.2.6.7 Sales Tax Transactions When you enter a transaction in a journal line or an order line, Dynamics 365 initializes the sales tax code based on the item and the customer/vendor. In order to view the calculated tax before posting, click the button Sales tax in the action pane or in the toolbar. This button is available in journal lines, sales and purchase order headers or lines, or in the posting dialog for transactions (e.g., a sales invoice). If necessary, you can change the sales tax groups or the sales tax code in a journal line or order line before posting. When posting an invoice, Dynamics 365 generates a transaction for the sales tax in the general ledger (according to the ledger posting group assigned to the sales tax code) and a sales tax transaction in the tax ledger.

9.2.6.8 New in Dynamics 365 Compared to Dynamics AX 2012, the new module “Tax” includes all menu items related to sales tax.

9.2.7

Basic Setup for Journal Transactions

In addition to the basic finance setup, you have to configure journal names before you can register a journal transaction in the general ledger.

9.2.7.1 Journal Names All ledger journals show a common structure, which is independent of the journal type. The difference between the journal types is that the related journals contain different fields. In addition, some journals include additional functionality – for example, the payment proposal feature in the vendor payment journal.

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Journal names (General ledger> Journal setup> Journal names) classify transactions by subject matters. The lookup field Journal type in this form controls in which journals you can use the selected journal name. The most common journal types are:     

Daily – General journal. Periodic – Periodic journal. Vendor invoice recording – Invoice journal in accounts payable. Vendor disbursement – Vendor payment. Customer payment – Payment of customers.

Depending on the transactions in your company, journal names with further journal types are required (e.g., a journal with the journal type “Post fixed assets” for fixed asset transactions). If you want to use the invoice register and the invoice approval journals in accounts payable, you need a journal name with the journal type “Invoice register” and a journal name with the journal type “Approval”.

Figure 9-10:

Managing journal names

If you select different number sequences in the field Voucher series of journal names, you can distinguish different journals by the voucher number. The default for the offset account in journal lines is specified in the fields Account type and Offset account of the journal names. Another important setting in the journal names is the

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slider Amounts include sales tax. If this slider is set to “Yes”, amounts that you enter in the journal lines include the sales tax or input tax (if applicable). Otherwise, the entered line amount is a net amount to which Dynamics 365 adds the sales tax.

9.2.7.2 Journal Approval There are two options in the journal name setup which enforce an approval of journals before posting:  Journal approval system – Enabled in the field group Approval.  Approval workflow – Enabled in the field group Approval workflow. If you want to activate the journal approval system for a journal name, set the slider Active in the field group Approval to “Yes”. Then select the responsible user group for approval in the corresponding lookup field Approve. In order to apply the approval workflow, an appropriate general ledger workflow has to be specified in the menu item General ledger> Journal setup> General ledger workflows. The workflow type “Ledger daily journal workflow” determines approval workflows for daily journals. You can find more details on workflows in section 10.4 of this book.

9.2.7.3 Posting Layers When you create a journal name, the default for the Posting layer that is used in transactions, is “Current”. If you need to cut off particular ledger transaction (for example because of local tax regulations), you can create particular journal names with the posting layer “Operations”, “Tax”, or one of the custom layers. You can subsequently select the appropriate posting layer in the closing sheet (when executing the fiscal year closing) or in a journal transaction (indirectly via the journal name) to post transactions, which are not included in regular reports that are based on the layer “Current”. In order to analyze and to report the transactions in the other layers, you can set up additional versions of financial reports which include the transactions in these layers.

9.2.7.4 General Ledger Parameters The general ledger parameters (General ledger> Ledger setup> General ledger parameters) contain further settings for journal transactions. One of these settings is the parameter field Check for voucher used, which you should not set to “Accept duplicates” in order to avoid confusion with the voucher number of documents.

9.2.8

Case Study Exercises

Exercise 9.1 – Financial Dimensions Your company introduces business areas for reporting purposes. In order to deal with this requirement, create and activate a financial dimension “##Areas” (custom dimension) with the shared values “Area ## 1” and “Area ## 2” (## = your user ID). Note: Numbers are not allowed in the dimension name.

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Exercise 9.2 – Main Accounts Following new main accounts are required in your company (## = your user ID):    

Main account 111C-##, Name “Petty cash”, Account type “Balance sheet”. Main account 111B-##, Name “##-Bank”, Account type “Balance sheet”. Main account 6060##, Name “##-Consulting”, Account type “Expense”. Main account ZZ##, Name “##-Account structure test”, Account type “Balance sheet”.

Create these accounts in the chart of accounts of your company. Exercise 9.3 – Account Structures Unlike the other main accounts that you have created in exercise 9.2, the main account ZZ## is not included in an account number range which is covered by any account structure. For this reason, set up a new account structure which only applies to this main account. Create and activate a new account structure ZS## with the main accounts and the financial dimension “##Areas” as segments (and in case of interunit accounting additionally the balancing dimension). The main account ZZ## is the only applicable main account in this account structure. Assign the account structure to your company. Note: If you are sharing the Dynamics 365 training database, delete the account structure once you have finished all exercises to avoid confusion. Exercise 9.4 – Bank Accounts Your company opens a new bank account at the bank. Create a bank account B-## with any routing number and bank account number of your choice. Assign the main account 111B-## of exercise 9.2 to this bank account. Exercise 9.5 – Journal Names You want to register the transactions of the next exercises in your own journals. For this purpose, create a journal name G-## (## = your user ID) with the type “Daily”, a journal name I-## with the type “Vendor invoice recording”, and a journal name P-## with the type “Vendor disbursement”. Select an existing number sequence in all these journal names.

9.3

Transactions in Finance

Every business process with an impact on financial values generates general ledger transactions. Most of the ledger transactions are not initially created in accounting but derive from transactions in other areas like purchasing, sales, or production. Transactions in these areas generate ledger transactions in the background. Some ledger transactions originate from activities in accounting. In order to record these transactions, you have to post a journal in the general ledger module.

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General Journals

If you want to post manual transactions in the general ledger, use a general journal. You can access the general journals from the workspace General journal processing or with the menu item General ledger> Journal entries> General journals. General journals refer to the journal type “Daily”. Apart from the general journals, there are financial journals that are assigned to other journal types – for example the invoice journals in the accounts payable menu, or the payment journals in accounts payable or accounts receivable. If you do not need the advanced functionality of the specific journals (e.g., payment proposals in payment journals), it does not matter whether you register a transaction in the specific journal or in the general journal. Global general journals (General ledger> Journal entries> Global general journals) work the same way as regular general journals, but they contain the general journals of all companies. For this reason, you have to select the company when creating a journal (regular general journals use the current company).

9.3.1.1 Journal Header Journals are vouchers and therefore consist of a header and at least one line. The header contains common settings and default values for the corresponding lines. In each line, you can override the default values that derive from the corresponding header field (e.g., the offset account). Before you can post a journal, the balance of the individual vouchers (lines with the same voucher number) and the balance of the complete journal have to be zero. The balances are shown in the journal line form at the bottom.

Figure 9-11:

Selecting a journal name in a new general journal header

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The selected option in the lookup field Show at the top of the general journal list page determines whether open or posted journals are shown. In order to register a new journal, click the button New and select a journal name. On the tab Setup of the journal header, you can override the default values which derive from the journal name (e.g., the offset account or the currency). If somebody is working in the lines of a particular journal while you view the journal header, it is displayed in the columns In use and In use by.

9.3.1.2 Journal Lines In order to switch to the journal lines, click on the Journal batch number shown as a link in the grid of the journal list page or click the button Lines in the action pane. In a new line, the default for the posting date is the current session date. The voucher number derives from the number sequence of the journal name which you have selected in the header. Depending on the option selected in the column Account type of the lines, you have to enter a ledger account, a vendor, a customer, a bank account or a fixed asset in the column Account.

Figure 9-12:

Registering a voucher with multiple offset transaction lines

If you enter a ledger account in the field Account, segmented entry control applies (see below). With segmented entry control, the main account usually has to be entered in the first segment of the ledger account field. If and which financial dimension segments are available and need to be entered is depending on the applicable account structure for the selected main account. The value lookup in the account field shows the available values for the segment that is currently selected. Once you have selected the account, you can enter the applicable amount in the column Debit or Credit. In a single-line transaction, which applies the same amount

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to the debit and the credit account, enter the Offset account type and the Offset account (including segments for financial dimensions as applicable) in the appropriate columns of the journal line. The columns Company and Offset company provide the option to register intercompany transactions. As a prerequisite, intercompany accounting (General ledger> Posting setup> Intercompany accounting) has to be configured for these companies. In order to support registration, a separate pane at the bottom of the lines shows the balance of the voucher of the selected line and the balance of the complete journal. Instead of entering the journal lines in the journal line detail form, you can use the Office integration: Click the button Open lines in Excel in the journal header and enter or edit the journal lines in Excel. If you want to enter a transaction with more than one offset account, you can record one voucher in multiple lines. In this case, do not enter an offset account in the first line, but in one or more separate journal lines for the offset transactions. As long as the balance of the voucher is not zero, Dynamics 365 retrieves the same voucher number as in the previous line. Once the voucher balance is zero, the next line shows a new voucher number (as a prerequisite, the option “In connection with balance” has to be selected in the field New voucher of the journal name). Note: If the “One voucher” functionality is turned off (slider Allow multiple transactions within one voucher on the tab Ledger/General of the general ledger parameters), it is not possible to post a voucher in multiple lines with different subledger accounts – for example, different customers.

9.3.1.3 Segmented Entry Control Segmented entry control is used for entering the ledger account in account fields across all areas of the application. Since the main account and all applicable financial dimensions are merged into one single ledger account field, this field includes the complete posting information as required by the applicable account structure. When entering the ledger account, the value lookup refers to the currently active segment of the ledger account field. In order to search a segment value, enter the search content – the first characters of the identification or the name – in the applicable segment of the ledger account field before or after opening the value lookup with the lookup button or the shortcut key Alt + Down. In the example of Figure 9-13, you can view the segment lookup that is shown after entering the characters “sp” in the second segment of the ledger account field. This lookup contains the list of business units that start with the characters “sp” in the ID or the name.

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Figure 9-13:

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Segmented entry for the main account and applicable financial dimensions

The sequence and the number of segments are depending on the account structure that is assigned to the selected main account (see section 9.2.4). If the account structure does not include a financial dimension or allows blanks for a particular segment, it is not required to enter a corresponding segment value.

9.3.1.4 Posting Financial Journals Once you have completed the journal lines, post the journal with the button Post or Post/Post in the action pane of the journal header or lines. If there are data issues, an error message is shown, and it is not possible to post the transaction. If you click the button Post/Post and transfer (instead of Post/Post) in the journal header, only vouchers with correct data are posted. Vouchers in the journal with incorrect data are transferred to a new journal, in which you can enter corrections.

9.3.1.5 Journal Approval System If journal approval – either the journal approval system or the approval workflow – is activated for the selected journal name, it is not possible to post the journal before obtaining the required approval. If the journal approval system is used, you can request the approval with the button Approval/Report as ready in the journal header. The responsible person for approval then clicks the button Approval/Approve to release the journal for posting.

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9.3.1.6 Periodic Journals and Voucher Templates If you need to register a particular transaction repeatedly, you can use one of the two options for recurring registration:  Periodic journals – If the transaction recurs on a regular basis.  Voucher templates – If you only want to use a copy template. Periodic journals are used to register transactions which are repeated on a regular basis (e.g., an office rent, or monthly installments). In order to create a periodic journal, open the form General ledger> Journal entries> Periodic journals and enter a journal header and journal lines (similar to a general journal). An alternative way for creating a periodic journal is to copy a general journal to a periodic journal (click the button Period journal/Save journal in the lines of a general journal). The column Date in the lines of a periodic journal determines the start date for the periodic transactions. The frequency of the transaction (e.g., monthly) has to be specified in the columns Units and Number of units (also shown on the tab Periodic).

Figure 9-14:

Retrieving a periodic journal into the lines of a general journal

In order to post the transactions for a periodic journal, you have to create related general journals on a regular basis. In the lines of such a general journal, retrieve the periodic journal with the button Period journal/Retrieve journal. Once the periodic journal lines are transferred to the general journal, you can edit and post the lines in the general journal. In the periodic journal, the column Date in the lines is – at the time when you retrieve the journal lines – updated with the next posting date. This date is calculated by adding the frequency period to the latest retrieved posting date. The column Last date in the periodic journal lines indicates when the journal has been retrieved the last time. Apart from the general journals, you can also use periodic journals with invoice journals in accounts payable. Unlike periodic journals, voucher templates are templates for simply copying journals, without a periodic interval. In order to create a voucher template, click

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the button Functions/Save voucher template in the toolbar of the journal lines in a general journal (or in the action pane of invoice journal lines). In the dialog that is shown when saving the template, select the Template type “Percent” in case you want to apply a proportional distribution of line amounts. If you select this voucher template in the template dialog that you open with the button Functions/Select voucher template in a journal, a second dialog is shown in which you can enter the amount that you want to distribute across the lines according to the proportion in the template.

9.3.1.7 New in Dynamics 365 Compared to Dynamics AX 2012, items which are new in general journal processing include the workspace General journal processing and the global journals. With version 8.0 of Dynamics 365, the option to post one voucher in multiple lines is controlled by a general ledger parameter and will be discontinued in future.

9.3.2

Invoice Posting

Depending on the particular invoice, different ways are required for registering and posting the document. In Dynamics 365, there are the following options:  Sales order invoice – For items shipped to customers (see section 4.6.1).  Free text invoice – For sales invoices not related to items (see section 4.6.3).  (Pending) Vendor invoice – For items (or procurement categories) received from vendors, with or without reference to a purchase order.  Vendor invoice journal – For invoices not related to items or categories.  General journal – For manual purchase or sales invoices (not to be printed).

9.3.2.1 Invoices in the General Journal If you want to register a vendor invoice, which refers to a particular offset account (e.g., when posting an expense), you can use a vendor invoice journal in which you enter the offset account. For customer invoices, in which you have to enter a particular offset account, you can use a free text invoice. Alternatively, it is possible to register an invoice in the general journal. This is, for example, an option for recording sales invoices which are not printed in Dynamics 365 (e.g., invoices from an external cash register). If you enter a sales invoice in a general journal, select the Account type “Customer” and enter the customer number in the column Account of the journal lines. In the column Offset account, enter an appropriate revenue account. On the tab Invoice, you have to enter the invoice number and the terms of payment or the applicable cash discount. Before posting, you can check whether the sales tax groups on the tab General are correct. If you want to check the complete sales tax calculation, click the button Sales tax in the toolbar of the tab List. In order to post the journal finally, click the button Post/Post or Post in the action pane of the journal header or the journal lines.

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Registering a vendor invoice in a general journal works similar to the sales invoice (for a vendor invoice, select the Account type “Vendor”).

9.3.2.2 Options for Vendor Invoice Posting Depending on whether a vendor invoice refers to a purchase order or is issued independent of a purchase order, there are following ways to process the invoice:  Purchase order invoice – Purchase orders and purchase order invoices include only lines with products or procurements categories.  Invoice without order assignment – Depending on whether you want to select an offset ledger account manually, there are two types: o With non-stocked products or procurements categories – Posting is similar to purchase order invoice posting, just without purchase order assignment. o With ledger accounts – Register and post an invoice journal, usually for particular subjects like office rent or legal services.

Figure 9-15:

Options for processing vendor invoices

You can register a vendor invoice – with or without reference to a purchase order – in the pending vendor invoice form (Accounts payable> Invoices> Pending vendor invoices, see section 3.6.1). The invoice lines in the pending vendor invoice form contain products and procurement categories. If the invoice entered in the vendor invoice form does not refer to a purchase order, you can only select noninventoried items and procurement categories. But there is no field for entering the offset ledger account manually. In order to register a vendor invoice that does not refer to an item number or a procurement category, but directly to a ledger account (e.g., for office rent) or to a fixed asset (acquisition), you have to enter a journal transaction. In accounts payable, the following journals are available for invoice registration and approval:  Invoice journal – Main form for vendor invoices in accounts payable.  Invoice register – In conjunction with the Invoice approval journal.  General journal – As described above.

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If you want to apply an approval workflow to invoice journals, set up an appropriate workflow with the workflow type for the respective journal type in the menu item Accounts payable> Setup> Accounts payable workflows and assign it to the journal name. For purchase order invoices, there are two options for recording and processing an invoice that requires approval:  Approval workflow in the pending vendor invoice form – Enter and post the invoice in the pending vendor invoice form with activated approval workflow.  Invoice register journal – As a prior step to the pending vendor invoice form, you can first post the invoice to interim accounts in the invoice register journal, followed by posting in the invoice approval journal (or the invoice pool) which finally opens the pending vendor invoice form. From a financial perspective, the main difference between the vendor invoice approval workflow and invoice register journal posting is that the invoice register journal already posts an invoice, which is subject to tax calculation, when starting the approval process. The open vendor invoice page (Accounts payable> Invoices> Open vendor invoices) shows all invoices that are not yet paid, irrespective of the way of posting the invoice. In the action pane of this form, the options in the button New provide alternative access to the different vendor invoice journals and to the pending vendor invoice form. Similar options are available in the workspace Vendor invoice entry and in the vendor form (on the action pane tab INVOICE).

9.3.2.3 Invoice Journals

Figure 9-16:

Registering an invoice journal line

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The invoice journal, which you can access from the workspace Vendor invoice entry or with the menu item Accounts payable> Invoices> Invoice journal, is the main form in account payable for registering invoices which do not refer to a purchase order. In the same way as in every financial journal, you have to create a header record in the list page before you can switch to the lines. Enter the invoice lines with vendor number (in the column Account), vendor invoice number (Invoice), transaction text, amount, offset account, terms of payment, approver (Approved by on the tab Invoice) and other data like sales tax and cash discount as applicable. Then post the invoice with the button Post/Post or Post in the action pane of the journal header or lines.

9.3.2.4 Invoice Registers The invoice register, which you can access from the workspace Vendor invoice entry or with the menu item Accounts payable> Invoices> Invoice register, provides the option to pre-register vendor invoices. The invoice register is already posting the vendor transaction, applicable sales tax transactions (depending accounts payable parameter settings), and ledger transactions (to interim accounts). If the vendor invoice refers to a purchase order, assign the purchase order in the invoice register to the invoice. The structure of the invoice register with journal header and lines is similar to the structure of the general journals, but the account type is restricted to “Vendor”. In the journal lines, enter the employee who is responsible for approval (Approved by in the lower pane of the journal lines), the terms of payment, the cash discount, and sales tax groups as applicable. If the invoice refers to a purchase order, select the purchase order number in the column Purchase order of the journal lines to facilitate later approval. In order to post a journal in the invoice register, click the button Post/Post or Post in the action pane of the journal header or lines. Posting a journal in the invoice register creates a regular vendor transaction, which you can access with the button VENDOR/Transactions/Transactions in the vendor form. The slider Approved on the tab General of this transaction is set to “No”, which is why the invoice is not included in payment proposals. The ledger transactions of the invoice register are posted to interim accounts. These interim accounts are specified in the vendor posting profile (Accounts payable> Setup> Vendor posting profiles, columns Arrival and Offset account on the tab Setup). In the accounts payable parameters, the lookup field Time of sales tax posting on the tab Ledger and sales tax/Sales tax determines for invoice register transactions, if sales tax is already posted with the invoice register, or later with the invoice approval.

9.3.2.5 Invoice Approval Journals Once a journal in the invoice register is posted, the responsible person for approval can approve it in the invoice approval journal.

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Figure 9-17:

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The invoice approval journal lines after fetching an invoice register

In order to start processing invoice approval, create a new header in the invoice approval journal (Accounts payable> Invoices> Invoice approval). Then switch to the journal lines and click the button Find vouchers in the action pane to retrieve the respective posted invoice register. The Find vouchers dialog shows all available invoice registers in the upper pane. Select one or more invoices for approval with the button Select in this dialog. Once you close the dialog with the button OK, the selected invoice(s) are transferred to the approval journal lines. If you want to remove a selected invoice from the approval journal lines before posting, click the button Remove vouchers in the action pane of the invoice approval. The following steps are depending on whether the invoice refers to an order:  Not related to a purchase order – In this case, select a ledger account (e.g., an expense account) in the lower pane of the invoice approval journal lines (first line in the lower pane of Figure 9-17). The expense amount does not include sales tax. If multiple expense accounts apply, enter multiple lines that share the total amount. In order to post the approval, click the button Post.  Related to a purchase order – In this case, click the button Functions/Purchase order to access the pending vendor invoice form for the purchase order. In the pending vendor invoice form, post the invoice as described in section 3.6.1.

9.3.2.6 Rejecting Invoice Approval If you do not want to approve a vendor invoice, which has been posted in the invoice register – for example, because it does not comply with the applicable purchase order, or because of other reasons – you have to post a cancellation.

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For this purpose, open the invoice approval journal, create a new header, and in the journal lines retrieve the applicable invoice register in the same way as for approval. But before you post the approval journal, click the button Functions/Cancel in the action pane. Then click the button Post/Post or Post in the action pane of the invoice approval journal header or lines to post the cancellation.

9.3.2.7 Invoice Pool The invoice pool, which you can access from the workspace Vendor invoice entry or with the menu item Accounts payable> Invoices> Invoice pool, shows all pending invoice register approvals. You can use the invoice pool to post the approval for invoice registers, which refer to a purchase order (alternatively to the invoice approval journal). For this purpose, click the button Purchase order in the action pane of the invoice pool to access the pending vendor invoice form for the purchase order (similar to the corresponding button in the approval journal lines).

9.3.2.8 New in Dynamics 365 Compared to Dynamics AX 2012, the Vendor invoice pool excluding posting details has been discontinued.

9.3.3

Payments

Posting an invoice creates an open transaction with the vendor liability or the customer debt.

9.3.3.1 Open Transactions In order to view the open transactions, click the button COLLECT/Settle/Settle transactions in the customer form or the button INVOICE/Settle/Settle transactions in the vendor form. The button CUSTOMER/Transactions/Transactions in the customer form or VENDOR/Transactions/Transactions in the vendor form opens the transaction form that shows all transactions (select the checkbox Show open only to apply a filter on open transactions). If you want to print the open transactions, use the report Accounts receivable> Inquiries and reports> Open transactions report for customers and the report Accounts payable> Inquiries and reports> Invoice> Vendor invoice transactions report for vendors.

9.3.3.2 Customer Payments If you want to register a customer payment which you have received, open the customer payment journal from the workspace Customer payments or with the menu item Accounts receivable> Payments> Payment journal. In the customer payment journal, create a record in the journal header and switch to the lines. In the journal lines, enter the payment with customer number (in the column Account), transaction text, payment amount, and offset account. If the customer has paid to your bank account, select the Offset account type “Bank”.

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If you want to settle a paid invoice when entering a payment line, select the invoice number in the column Invoice of the journal line – the payment journal line then receives the invoice amount. Alternatively, you can click the button Settle transactions in the toolbar of the lines to apply one or more invoices to a payment line. In the Settle transactions dialog, the checkboxes in the column Mark determine the invoices which are paid. Once you have marked all applicable invoices, click the button OK in the dialog. Apart from entering a payment in the journal lines, you can use the button Enter customer payment in the payment journal header to create and to settle payment lines (with this button, you can simply select open invoices for the payment). Another option for creating payment lines, which you can use for direct debiting (withdrawing from the customer bank account), is the customer payment proposal in the payment journal lines (similar to the vendor payment proposal, see below). Once you have completed the payment lines, post the customer payment journal with the button Post/Post or Post in the action pane of the journal header or lines

9.3.3.3 Vendor Payments In a similar way to customer payments, payments to vendors can be entered in a payment journal which you can access from the workspace Vendor payments or with the menu item Accounts payable> Payments> Payment journal. Manually registering a vendor payment works like registering a customer payment (including the options for settlement). But in most cases, you need additional support and control for outgoing payments. In Dynamics 365, the payment proposal and the payment status are available for this purpose. If you want to prevent paying a particular invoice, open the vendor transaction in edit mode and switch to the tab General. On this tab, you can set the slider Approved to “No” or enter an Invoice payment release date. The payment proposal does not include the invoice until you set the approval in the transaction to “Yes”, or until the release date has passed.

9.3.3.4 Methods of Payment Methods of payment (Accounts payable> Payment setup> Methods of payment) are an important setting for processing vendor payments. Usually, there are at least two methods of payment: One for manual transfers and one for electronic banking. In payment methods for electronic payment, select the option “Approved” or “Sent” in the field Payment status in order to prevent posting a payment before the payment export file has been generated. More settings for electronic payments (e.g., file formats) are included in further tabs of the payment method form. The field Period in the upper pane of the payment method form specifies if you want to collect all invoices in the selected period option (e.g., “Week”) to one payment or if you want to generate a separate payment per invoice.

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In the field group Posting on the tab General of the payment methods form, you can enter the bank account or ledger account from which you want to pay. This account is the default for the offset account when you select the payment method in a payment journal. If you want to support bank reconciliation by posting to a bridging account (see below), set the slider Bridging posting to “Yes” and enter the bridging account number. In the vendor form, you can select the Method of payment for the vendor on the tab Payment. The payment method in the vendor is the default for purchase orders, vendor transactions, and payment journals.

9.3.3.5 Vendor Payment Proposals The payment proposal is used to select vendor invoices automatically for payment. In order to run a payment proposal, click the button Payment proposal/Create payment proposal in the action pane of the lines in a vendor payment journal. In the Vendor payment proposal dialog, you can enter the proposal type (field Select invoices by with the options “Due date”, or “Cash discount date”, or both) and a date range for this date (From date and To date). If you select the option “Cash discount date” in the parameter Select invoices by, invoices without cash discount are not included in the proposal. On the tab Records to include of the dialog, you can access a filter on vendor and transaction data. Depending on the proposal type, the proposal for the Date to pay is the invoice due date or the cash discount date. If the due date (or cash discount date) is in the past, the current date is shown in the Date to pay. If you have entered a future date in the field Minimum payment date of the dialog (e.g., tomorrow’s date if preparing the payment for the next day), this date is used instead of the date of today. The Summarized payment date on the tab Advanced parameters in the dialog is used if the method of payment refers to the Period “Total”.

Figure 9-18:

Registering lines in a vendor payment journal

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Once you close the dialog with the button OK, another dialog is shown, in which you can check and edit the payment proposal. Remove invoices or change the Date to pay (you can edit the Due date on the tab Invoices or the Cash discount date on the tab Cash discount) as applicable before you click the button Create payments to transfer the proposal to the payment journal. The payment proposal applies a settlement for the selected invoices. Depending on the method of payment in the particular invoices, there is one payment line for multiple invoices or a separate payment line per invoice. Before posting the vendor payment, you can still edit the transferred proposal – click the button Payment proposal/Edit invoices for selected payment for this purpose.

9.3.3.6 Exporting and Posting Payments In order to check the payment before generating and posting it, you can optionally print the payment journal with the button Print/Journal in the header or lines. If an export file for electronic payment is required, click the button Generate payments in the payment journal lines once you have completed the payment lines. Make sure to generate an export file before posting the payment, if you need the file. When generating the payment, Dynamics 365 sets the payment status of the journal lines to “Sent”. If required, you can also update the payment status in the appropriate column or with the button Payment status in the toolbar of the lines. Finally, click the button Post/Post or Post in the action pane of the journal header or lines to post the payment from the selected bank or ledger account.

9.3.3.7 Bridging Transactions Bridging transactions are required if you want to keep the payment on a separate account for the time between posting the payment and recognizing the transaction on the bank account (e.g., if you send a check). For this purpose, the payment is not directly posted to a bank account when posting the payment journal, but to a bridging account. Settings in the payment method – the slider Bridging posting and the Bridging account – control whether bridging transactions are generated. When you recognize the transaction on the bank account (e.g., in the course of reviewing the bank statement), you have to post a transfer from the bridging account to the bank account. In order to register this transfer, create a journal in the general journals (General ledger> Journal entries> General journals). In the action pane of the general journal lines, click the button Functions/Select bridged transactions to access a dialog in which you can select the applicable bridged transactions. For the selected transactions, you can subsequently post the transfer in the general journal.

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9.3.3.8 Centralized Payments The functionality of centralized payments supports a company structure with a head office that processes the payments of an affiliated group. Before you can use centralized payments, you have to set up intercompany accounting (General ledger> Posting setup> Intercompany accounting) for the respective legal entities. In addition, appropriate permission settings in an organization hierarchy with the purpose “Centralized payment” are required. Payment journal lines and payment proposals show the column Company (Company accounts). When you post a centralized payment, you can settle invoices in other companies.

9.3.4

Transaction Reversal

In Dynamics 365, there are two different types of transaction reversals: Reversals that you enter manually (for corrections) and automatic reversals (for accruals).

9.3.4.1 Transaction Reversal The transaction reversal, which is available for ledger transactions, vendor transactions, and customer transactions (including free text invoices), is a simple way to correct wrong vouchers in finance. The transaction reversal is not available for transactions which refer to inventory, purchase orders, or sales orders. In order to reverse these transactions, register an appropriate document in the original module – for example a customer return order in the Sales and marketing menu.

Figure 9-19:

Reversing a ledger transaction

The transaction reversal starts from the transaction inquiry. In order to access the customer transactions, click the button CUSTOMER/Transactions/Transactions in the customer form. For the vendor transactions, click the button VENDOR/Transactions/ Transactions in the vendor form. For the ledger transactions, click the button All transactions in the trial balance (General ledger> Inquiries and reports> Trial balance) once you have calculated the balances and selected a ledger main account.

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In the transaction inquiry, select the incorrect transaction and click the button Reverse transaction in the action pane. In the dialog that is shown next, you can enter the Reversal posting date. If you want to reverse a settled vendor or customer transaction (e.g., a paid invoice), you have to cancel the settlement (see section 9.2.5) before you can reverse the transaction. Transaction reversal posts a new transaction that offsets the original transaction. If required, you can reverse a reversal.

9.3.4.2 Automatic Reversal with Reversing Entries Unlike manual transaction reversals, which are used to correct wrong transactions, reversing entries are transactions that are generated automatically for the reversal of accruals in a later period. Reversing entries are available in the general journals (General ledger> Journal entries> General journal). In order to generate a reversing entry, select the checkbox Reversing entry and enter a Reversing date in the rightmost columns of the journal lines when entering the original transaction. In the journal header, the checkbox Reversing entry and the Reversing date provide a default for the lines. When you post a general journal with an automatic reversal, a second transaction that reverses the original transaction is posted in parallel.

9.3.5

Case Study Exercises

Exercise 9.6 – Segmented Entry in General Journals An amount of USD 50 is transferred from the account ZZ## with the dimension value “Area ## 1” to the account 111C-## (accounts of exercise 9.2). Enter the transaction in a general journal with the journal name G-## (of exercise 9.5). Which segments are shown for the main account ZZ##? Review the value lookup for these segments. Then post the journal and check the balance and the transactions of both accounts of the current exercise. Exercise 9.7 – General Journal Transaction You withdraw USD 100 from the bank account B-## of exercise 9.4 and put it to the petty cash account 111C-## of exercise 9.2. Register this transaction in a general journal with the journal name G-##. Before posting, check the balance and transactions for the bank account and the petty cash account. Then post the journal and check the balances and transactions again. Exercise 9.8 – Vendor Invoice The vendor of exercise 3.2 submits the invoice “VI908” with a total of USD 50. This invoice covers expenses, for which you have created the main account 6060## in exercise 9.2.

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Record the invoice in an invoice journal with the journal name I-## of exercise 9.5. The invoice applies the terms of payment and the cash discount of exercise 3.1. Before posting, check the vendor transactions and the vendor balance and – for the expense account – the ledger transactions and the ledger balance. Then post the invoice and check the balances and the transactions again. Exercise 9.9 – Vendor Payment The invoice “VI908”, which you have posted in the previous exercise, needs to be paid. Register the payment in a vendor payment journal with the journal name P## of exercise 9.5. Pay from the bank account B-## of exercise 9.4. The payment amount should be reduced by the applicable cash discount. Before posting, check the vendor balance and the bank account balance. Then post the payment and check the balances, the voucher transactions, and the transaction origin for the payment. Exercise 9.10 – Transaction Reversal Your vendor of exercise 3.2 now submits the invoice “VI910” which is similar to the invoice “VI908” of exercise 9.8, but with a total of USD 30. Register and post this invoice. After posting, you notice that the posted transaction is incorrect. You want to reverse it for this reason. Before reversing, check the vendor transactions and the vendor balance and – for the expense account – the ledger transactions and the ledger balance. Then reverse the invoice and check the balances and the transactions again.

9.4

Ledger Integration

One of the main advantages of an integrated business solution like Dynamics 365 is, that business transactions registered anywhere in the application are immediately available in all other areas. Posting, for example, a sales order invoice does not only create the required document, but it also generates the following transactions:    

Inventory transactions – Inventory value reduction. General ledger transactions – Revenue, COGS, stock, and customer accounts. Customer transaction – Open invoice in accounts receivable. Sales tax transactions – As applicable.

Depending on the particular transaction, the invoice may also post transactions for the commission, discount, or cash payment.

9.4.1

Basics of Ledger Integration

Ledger integration – the integration of the general ledger in finance with the other areas of the application – is one of the core characteristics of an integrated business

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solution (ERP solution). In Dynamics 365, a transaction in any area that is relevant to finance (e.g., sales, purchasing, inventory, or production) posts a transaction to the general ledger automatically.

9.4.1.1 Basic Settings A number of settings control, whether and which main accounts apply to the different transactions in business. For the areas of purchasing, sales, inventory, and production that are covered by this book, the following settings are relevant:  Summary accounts for vendor liabilities and customer debts – In the posting profiles in accounts payable and accounts receivable.  Main accounts for inventory transactions – In the posting setup.  Main accounts for resource usage in production – In resources, cost categories, and production groups. In addition, specific settings are available for particular transactions like sales tax, cash discount, indirect costs, or miscellaneous charges.

9.4.1.2 Vendors and Customers Vendor posting profiles control the assignment of summary accounts for vendor transactions. Customer posting profiles for customer transactions work similarly. You can find more details on posting profiles in section 3.2.3.

9.4.1.3 Subledger Accounting Subledger accounting in Dynamics 365 decouples posting in subledgers (e.g., in accounts receivable) from posting in the general ledger. For this purpose, the subledger journal entry functionality provides the option to execute the transfer to the general ledger either synchronous or asynchronous, and either detailed or summarized. Subledger accounting does not apply to all subledger transactions, but to some particular document types including:  Free text invoices – See section 4.6.3.  Product receipts – Purchase order receipt, see section 3.5.4.  Vendor invoices – Purchase order invoice, see section 3.6.1. In the general ledger parameters, settings on the tab Batch transfer rules control the subledger transfer per company and document type. The Transfer mode specifies, when a subledger transaction is posted to the general ledger:  Synchronous – Immediately posting to the general ledger.  Asynchronous – Posting as soon as sever capacity is available.  Scheduled batch – In a separate batch job (e.g., in the nighttime), with the option to view subledger transactions before the transfer to the general ledger. For documents that use the scheduled batch transfer, you can view posted subledger transactions in the menu item General ledger> Periodic tasks> Subledger journal entries not yet transferred until the transfer to the general ledger. With the

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button Transfer now (for an immediate transfer) or Transfer in batch (for a scheduled transfer) in this form, you can post the subledger transactions to the general ledger. The button View accounting in the subledger journal entry form and in applicable source documents (e.g., free text invoices) provides access to the complete accounting information that includes all applicable financial segments.

9.4.2

Ledger Integration in Inventory

When you post inventory receipts and issues to the general ledger, there are two different types of transactions in Dynamics 365 (see section 7.1.1):  Physical transaction – Posted with the packing slip.  Financial transaction – Posted with the invoice. Depending on the structure of the chart of accounts in your company, you can use the same or different main accounts for the physical and for the financial transaction.

9.4.2.1 Physical Transactions It is an option, not compulsory, to post physical transactions (product receipts and packing slips) to the general ledger. The following settings control whether ledger posting is activated for physical transactions:  Item model group – Checkbox Post physical inventory.  Accounts payable parameters – Slider Post product receipt in ledger on the tab General/Product receipt.  Accounts receivable parameters – Slider Post packing slip in ledger on the tab Updates/Packing slip. For transactions in production control, you can find the relevant settings on the tab General in the production control parameters. Physical transactions in production control are picking lists and report as finished transactions. Irrespective of the parameter settings, physical transactions of items with the inventory model “Standard costs” are always posted to the general ledger.

9.4.2.2 Financial Transactions For financial transactions, the checkbox Post financial inventory in the item model group determines whether inventory transactions are posted to the general ledger. If this checkbox is cleared in an item model group, ledger integration is not active for the assigned items. For items with this setting, inventory consumption does not post ledger transactions, and purchase invoice are posted to the expense account for consumption. This is the appropriate setting for service items.

9.4.2.3 Posting Setup The posting setup (Cost management> Ledger integration policies setup> Posting or Inventory management> Setup> Posting> Posting) determines the main accounts for inventory transactions. It includes the following tabs with account settings:

9.4 Ledger Integration     

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Sales order – Packing slips and invoices in sales. Purchase order – Product receipts and invoices in purchasing. Inventory – Journal transactions in inventory. Production – Picking lists, reporting as finished, and costing in production. Standard cost variance – Standard cost variances in inventory transactions.

Each of these tabs shows a list of available transaction types in the left pane. In order to view the related main accounts in the right pane, select the respective transaction type in the left pane. The posting setup is primarily depending on the combination of two relations:  Item relation – Items or categories.  Account relation – Customers or vendors. In addition, main account settings optionally include the sales tax group and – for standard cost variance transactions – the cost group as applicable dimensions. In the item relation and the account relation (customer on the tab Sales order, vendor on the tab Purchase order), there are three levels for the assignment of accounts:  Table – Particular item, customer, or vendor.  Group – Item group, customer group, or vendor group.  All– All items, customers, or vendors. The Item code “Category” – an additional option in the item relation for sales and for purchasing – provides the option to specify settings at the product category level.

Figure 9-20:

The posting setup with the account settings for revenue posting

When you post a transaction, Dynamics 365 always searches for the most specific setting (“Table”) first, then for the group setting, and finally for the general setting (“All”). When you post, for example, a sales invoice, settings for the particular

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customer and item have the highest priority, followed by group settings. Settings on the tab Ledger and sales tax/General in the accounts receivable parameters control, whether the search should primarily use the item or the customer dimension. For purchasing, similar settings are available in the accounts payable parameters. As an alternative to the access from the menu, you can open the posting setup form with the button Posting in the item group form, or with the button Setup/Item posting in the customer group or vendor group form. When you access the posting setup from a group form, it is showing the ledger settings filtered on the selected group. In the item group form, the right pane shows the main account settings (filtered on the selected item group).

9.4.2.4 Transaction Combinations and Ledger Reconciliation The transaction combinations (Cost management> Ledger integration policies setup> Transaction combinations) control the available assignment levels in the posting setup. Since reports for the reconciliation of the general ledger with inventory – for example, the inventory value report (Cost management> Inquiries and reports> Inventory accounting - status reports> Inventory value, see section 7.3.1) – are usually based on item groups, the item group relation is usually activated in the transaction combinations.

9.4.2.5 Example – Transactions Related to Sales Order Processing The following example for the automatic posting of ledger transactions based on ledger integration settings shows the transactions in sales order processing with activated ledger integration for packing slip and invoice posting (physical and financial transactions). With the packing slip for the sales order, Dynamics 365 posts a ledger transaction that debits the account Cost of units, delivered and credits the account Cost of goods sold, delivered as specified in the posting setup. When posting the invoice, the ledger transactions that have been posted with the packing slip are reversed, and a ledger transaction is posted that debits the account Cost of units, invoiced and credits the account Cost of goods sold, invoiced. In parallel, a ledger transaction that credits the customer summary account (specified in the posting profile) and debits the account Revenue and – if applicable – the sales tax account is posted. If a setting for the transaction type Discount is entered in the posting setup, sales line discounts are posted to this account. Otherwise, the discount is not posted separately but reduces the revenue amount.

9.4.2.6 Standard Cost Price and Moving Average For items with an inventory model “Standard cost” (see section 7.3.1), essential settings are specified on the tab Standard cost variance of the posting setup. On this tab, the main accounts for the posting of differences between the actual cost price

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of purchase order invoices (or production order costing) and the standard cost price are specified (split by posting type, e.g., Purchase price variance). For items that are assigned to an inventory model with a fixed receipt price, settings for the posting of price differences are specified on the tabs Purchase order and Inventory of the posting setup. For items with an inventory model “Moving average”, settings for the posting of price differences (for quantities that are not in stock anymore when receiving the invoice) and of revaluation are specified on the tab Inventory of the posting setup.

9.4.2.7 Service Items and Non-Stocked Items Items that are not tracked in inventory (e.g., office supplies or consumables) can be linked to the product type “Service” and a particular item group and item model group for service items. In the item model group, ledger integration for physical and financial transactions should be deselected. If you post a purchase invoice with such an item, a ledger transaction is posted that credits the expense account for consumption (instead of a stock account transaction). If you post a sales invoice, there is only a ledger transaction that credits the customer summary account and debits the revenue account (and no ledger transaction to the accounts Cost of units, invoiced and Cost of goods sold, invoiced). You can assign non-stocked items to an item model group with a cleared checkbox Stocked product (see section 7.2.1). This setting prevents inventory transactions and deactivates the ledger integration for physical and financial transactions. But physical items and service items, which are included in a bill of materials, have to be assigned to an item model group in which the checkbox Stocked product is selected.

9.4.2.8 Changes of Settings In order to avoid issues in the reconciliation of the general ledger with inventory, you should not change ledger integration settings in the item model group, in parameters, and in the posting setup for items, which are in stock or which have got open inventory transactions. This includes both, changing the setup itself and changing the assignment of active items to item groups.

9.4.3

Ledger Integration in Production

Unlike ledger transactions that are generated in purchasing, in sales, or in inventory, ledger transactions that are generated in production have to include the cost of resource operations.

9.4.3.1 Production Control Parameters In order to comply with this requirement, the lookup field Ledger posting on the tab General in the production control parameters includes the following options:

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 Item and resource  Item and category  Production groups The setting in the production control parameters, which is not available in the production parameters by site, is the default for production orders. It is possible to override this default in the individual production orders – for example if you want to apply specific settings for prototype production. If the option “Item and resource” is selected in the Ledger posting parameter, item transactions apply the main accounts that are specified in the posting setup. For route consumption (resource usage), the main account settings in the resource (Production control> Setup> Resources> Resources, tab Ledger postings) are used. If the option “Item and category” is selected in the Ledger posting parameter, item transactions also apply the main accounts that are specified in the posting setup. But for route consumption, settings in the applicable cost category (Production control> Setup> Routes> Cost categories, tab Ledger postings) are used. If the option “Production group” is selected in the Ledger posting parameter, settings in the production group (Production control> Setup> Production> Production groups) are used for item transactions and route consumption. Production orders show the applicable production group on the tab General in the detail form (default from the tab Engineer in the released product).

9.4.3.2 Ledger Transactions in Production When you process a production order and post a transaction, following ledger transactions are posted (the main accounts are depending on the selected option in the Ledger posting parameter):  Picking list – Account Estimated cost of materials consumed against Estimated cost of materials consumed, WIP (WIP = “work in process”).  Resource usage – Account Estimated manufacturing cost absorbed against Estimated manufacturing cost consumed, WIP.  Report as finished – Account Estimated manufactured cost against Estimated manufactured cost, WIP.  Indirect costs – Settings in the costing sheet: Estimated indirect costs absorbed against Estimated cost of indirect cost consumed, WIP. The transactions are posted with the posting of any journal (picking list, route card, job card, report as finished). Costing the production order reverses all these transactions and posts the final financial receipt of the manufactured item, the consumption of materials and resources, and indirect cost transactions to main accounts that are depending on the selected option in the Ledger posting parameter and the related settings.

10

Core Setup and Essential Features

The organization of an enterprise determines the setup of its business application. For this reason, there needs to be an implementation project which includes the setup of the organization and of other core parameters before you can start to work in Dynamics 365.

10.1

Organizational Structures

If you want to set up a new Dynamics 365 environment with its own database, you have got to access the Microsoft Dynamics Lifecycle Services. From the Lifecycle Services, you can deploy a cloud-hosted environment (hosted in Microsoft Azure) or an on-premise environment (hosted in your datacenter). Within a Dynamics 365 environment, the organization model represents the structure of the enterprise and its business processes. For this reason, it has to be configured according to the operational and statutory structure of the enterprise. You can divide the organizational structures into the following types:  Statutory organization structures for legal reporting – Hierarchies that comply with the regulations of public authorities (e.g., for tax purposes).  Operational organization structures for management reporting – Hierarchies that comply with the management requirements (e.g., divisional structures).  Informal structures – Independent of organizational hierarchies. In order to comply with the different reporting requirements, large enterprises oftentimes have got multiple organizational structures and hierarchies in parallel. You can, for example, set up one hierarchy that matches the structure and the purpose of legal entities, another hierarchy that represents the divisional structure, and a third hierarchy that complies with regional structures. For other enterprises, one simple hierarchy may be sufficient for all purposes.

10.1.1

Organization Model Architecture

The organization model in Microsoft Dynamics 365 meets the requirements of the different kinds of organizations. Depending on the requirements, the organization setup alternatively includes multiple organization hierarchies in parallel, which decouples the operational organization from the statutory organization, or only one simple hierarchy that is used for all purposes.

10.1.1.1 Organization Types Following organization types are included in the organization model:

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019 A. Luszczak, Using Microsoft Dynamics 365 for Finance and Operations, https://doi.org/10.1007/978-3-658-24107-0_10

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 Legal entities – Represent the statutory organization.  Operating units – Represent the operational organization.  Teams – Represent informal structures. Only organization units with the type “Legal entity” and “Operating unit” are available in organization hierarchies. The type “Team” characterizes an informal type of organizations, which is not included in hierarchies.

10.1.1.2 Using the Organization Model within Dynamics 365 Apart from a representation of the company organization, the organization model is used in many areas of the application, including the following purposes:  Company structure – Legal entities are linked to companies in Dynamics 365, which is why you have to set up companies as legal entities.  Financial dimensions – Since legal entities and operating units are available as a basis for financial dimensions, it is possible to use them in financial reporting.  Data security – Based on the organization hierarchy purpose Security, you can restrict the user access to organizations separately from the company structure.  Business policies – Business rules for areas like approval processes and centralized payments can apply a structure which is different from the hierarchy of legal entities. Legal entities and operating units are not only part of the organization hierarchies, but they are also included in the global address book (see section 2.4). For this reason, features of the global address book – for example, the address and contact details administration – are available for legal entities and operating units.

10.1.2

Organization Units

The organization model includ